Lawmakers grill ObamaCare official over co-op failures

Greg Nash

Senators on Thursday pressed a top ObamaCare official over a string of failures in non-profit health insurers known as co-ops. 

Twelve of the 23 co-ops, set up under ObamaCare to compete with larger private insurers, have gone out of business due to financial problems. 

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The Senate Finance Committee on Thursday questioned Andy Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS), about the roughly $1.2 billion in government loans that went to the failed co-ops and why the administration did not pick up on problems sooner. 

“I think saying $1.2 billion has been wasted is probably accurate,” Sen. Rob PortmanRob PortmanMcConnell: ‘Ticket-splitting’ will preserve GOP Senate majority The Trail 2016: Biting the hand that feeds him Portman focuses on heroin fight in new ads MORE (R-Ohio) said. 

Slavitt said that CMS is working with the Department of Justice on recovering the loans to failed co-ops, but the administration has acknowledged that it will not get all of the money back. Paying the federal government back, as opposed to claims or other expenses, tends to be a low priority for a co-op in receivership. 

Portman, who is facing a tough reelection race this year, questioned the additional loans given to co-ops after they began operating, saying that the administration should have realized the ventures were failing. 

“All of them were losing money, this is while you’re providing them this taxpayer money,” Portman said. “These are the kind of red flags that any prudential regulator would have looked at, and I think [the Department of Health and Human Services] blew it.”

Slavitt pointed to a lack of information when the co-ops first began in 2014, adding they did not have a history of claims and other data. 

“The decisions were made with the best information that folks had,” he said. “I would say it wasn’t until the first and second quarter of 2015 that, at least I felt, we started to have a really good picture of the profitability.”

Going forward, Slavitt said that CMS will look for ways to help the 11 remaining co-ops, mentioning the possibility of getting the co-ops access to outside capital. There are currently limitations on accessing outside capital.

“I am eager to loosen up the capital rules,” Slavitt said. 

He also mentioned the possibility of co-ops merging as “very much on the table.”

CMS said it will be releasing more information on the path forward “in the next day or so.”

Slavitt expressed some confidence that the remaining co-ops can make it through 2016 without shutting down. 

“Currently, I think all of the co-ops that have entered the 2016 plan year have every opportunity to be successful,” Slavitt said.

More broadly, Slavitt argued that turbulence in the early years of the program was to be expected, as these small, non-profit insurers set out to compete with more established players. 

“It doesn’t surprise me that in the first couple of years the co-ops are going to lose money,” he said. 

Democratic lawmakers did not deny that there were problems with the co-op program but argued bipartisan solutions are needed, not more votes on repealing ObamaCare. 

“Let’s fix problems in the Affordable Care Act in a bipartisan fashion and make sure we don’t undermine or destroy the achievements,” Sen. Bob CaseyBob CaseyTen senators ask FCC to delay box plan Lawmakers blast poultry, meat industries over worker injuries GOP chairman sees funding deal soon on medical cures bill MORE (D-Pa.) said.

Sen. Ron WydenRon WydenDems see political gold in fight over Trump's taxes Puerto Rico debt relief faces serious challenges in Senate Senate panel delays email privacy vote amid concerns MORE (D-Ore.) said Congress is not blameless, as it cut funding from the co-op program from $6 billion to about $2.4 billion.

Slavitt is currently the acting commissioner, as his nomination for the permanent position is before the Senate Finance Committee.

“I think you’ve shown again why you would be a very good choice to be the permanent administrator,” Wyden said at the end of the hearing. “So I’m going to do everything I can to try to move that along as well.”

Slavitt was nominated in July. Asked how the process is proceeding, Aaron Fobes, a spokesman for Republicans on the committee, said: “Mr. Slavitt is currently undergoing the Finance Committee's bipartisan vetting process.”