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Another Obamacare Co-Op Fails, Will Cease Operation at End of 2015

An Obamacare Co-Op in South Carolina has agreed to close its doors at the end of 2015. Consumers’ Choice Health Plan is the 9th Obamacare Co-Op to close this year out of 23 originally launched with low-interest government loans under the Affordable Care Act.

After consultation with state and federal regulators, Consumers’ Choice agreed its already poor financial situation could “worsen significantly.” The Co-Op decided to announce the coming closure now in order to give its 67,000 customers a chance to find new insurance during the open enrollment period which beings next month. Consumers’ Choice will continue to pay claims for its existing customers until the end of 2015.

Ray Farmer, Director of the South Carolina Department of Insurance, said in a statement published on the Co-Op’s website, “This was a difficult decision for the insurer and this agency, but this is what is in the best interests of South Carolina consumers and health care providers.”

Jerry Burgess, President and CEO of Consumers’ Choice, explained the Co-Op’s decision saying, “The recent announcement of a risk corridor reimbursement of just 12.6% cast doubt on the collectability of tens of millions of dollars through the federal risk corridor program and led to an unavoidable outcome.”

Burgess is referring to an announcement made by HHS earlier this month that the so-called risk corridors program had only taken in enough money to cover 12.6% of losses reported by insurers. Risk corridors is a pool of money which insurers who earn more than anticipated pay into so that those who earn less than needed to cover expenses can draw from it. In 2014, $362 million was paid into the pool and $2.87 billion was requested from it. Because HHS is prevented by law from supplementing the pool with other funds, it could only pay out 12.6% of claims.

Consumers’ Choice is the 9th Co-Op to close out of 23 that were set up to participate in the Obamacare exchanges as  lower cost alternatives. Co-Ops in Colorado, Iowa/Nebraska, Louisiana, New York, Nevada, Tennessee, Oregon and Kentucky have already closed this year.

As non-profit organizations, the Obamacare Co-Ops were intended to be a low cost competition to for-profit insurers that might help hold down prices by creating competition. The Affordable Care Act authorized $6 billion in low-interest loans to start the Co-Ops, though that figure was later cut during budget negotiations.

An Inspector General’s report published this summer found that 22 of the 23 Co-Ops lost money in 2014. Nineteen had claims that exceeded premiums, and 13 of 23 were significantly behind their enrollment projections. Four of the Co-Ops were placed on ““enhanced oversight and corrective action plans.”

Any of the remaining 14 Co-Ops who are forced to close this year would likely make an announcement in the coming week before the next open enrollment period begins.

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