Nearly one year ago, startup insurer Consumers’ Choice Health Insurance Co. abruptly shut its doors to South Carolina customers.
The closure came amid a nationwide collapse of young companies just like it, as mounting financial stress threatened to overwhelm the group of federally funded insurers known as consumer operated and oriented plans. Twelve of the Obama administration’s original 23 co-ops failed by the end of 2015, and since then, another five have bowed out.
The closures have forced thousands to find new health insurance, turning a promising project into a major headache and giving congressional Republicans election-year ammo in their campaign against the Affordable Care Act.
“Not only does the failure of CO-OPs waste taxpayer dollars, it also leaves hundreds of thousands of individuals displaced with insurance coverage — the exact opposite objective of the Affordable Care Act,” the House Energy and Commerce Committee said in a September report criticizing the administration’s “mismanagement and ineffective oversight.”
Yet in South Carolina and at least seven other states, the co-op controversy is about much more than political point-scoring. Co-ops like Consumers’ Choice collectively owe hundreds of millions of dollars to their customers, provider partners and state guaranty funds. But the federal government’s Centers for Medicare and Medicaid Services, which poured $2.4 billion of loans into launching the co-ops, has placed its own competing claim on the money. That has left state and federal officials at an increasingly heated impasse over whether policyholders or taxpayers should be made whole.