Obamacare Co-Op Goes Belly-Up in Iowa, Nebraska

Published January 15, 2015

One of the things to come out of Obamacare were so-called ‘Consumer Operated and Oriented Plans,’ or Co-Ops as they are more often called. These were intended to be health care cooperatives similar to how a farmers cooperative or credit union might operate, and be an alternative to conventional health insurers.

There’s nothing wrong with cooperatives, of course – my wife’s uncle was on the board of directors and served as chairman of Group Health Cooperative in Wisconsin for many years, and by most accounts they provided coverage as good as anybody else.

But not surprisingly, Obamacare took a decent concept and made it into a giant, government-subsidized mess. What was previously touted as the most successful of these entities, Co-Oportunity Health, has been taken over by the state of Iowa after just one year:

Health Insurance Startup Collapses In Iowa

It was a heck of a Christmas for David Fairchild and his wife, Clara Peterson. They found out they were about to lose their new health insurance.

“Clara was listening to the news on Iowa Public Radio and that’s how we found out,” Fairchild says. They went to their health plan’s website that night. “No information. We still haven’t gotten a letter about it from them.”

… Last year they saved hundreds of dollars switching from the insurer Wellmark to a plan run by CoOportunity Health. For the first time in a long time, Fairchild says, they felt like they had room to breathe.

“Basically it covered our office visits; covered exams,” he says. “It covered all but $40 of the medicine every four weeks. It was just marvelous. It probably was too good to be true.”

It was for them. CoOportunity Health has failed. The Affordable Care Act set aside funding for health care co-ops, to enable the organizations to compete in places where there aren’t many insurers. CoOportunity Health was the second- largest co-op in the country in terms of membership, and one of the largest in terms of the federal funding it received.

The story goes on to explain how, after soaking up $145 million in taxpayer dollars that were supposed to be repaid, Co-Opportunity Health was taken over by the state of Iowa as it was on the verge of insolvency. The Co-Op also sold policies in Nebraska.

The collapse in unfortunate on a number of levels, including obviously the disruption caused to those who had coverage through Co-Opportunity Health as well as the loss of taxpayer dollars. I myself was opimistic that, as new entrants to the market, the Co-Ops might actually get creative and innovative in terms of how they operate. One Co-Op, for example, had announced they would pay doctors for answering e-mails or talking on the phone with patients, something John Goodman has talked about in the past.

Unfortunately, it looks like the Co-Ops may be going the way of Solyndra, a tremendous waste of taxpayer dollars with little to show in terms of benefits. Something to keep in mind the next time someone suggests the government ought to be investing in startup companies in health care or any other sector, I suppose.