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Democrats Offer Lukewarm Defense of Health Co-ops

November 5, 2015 -- Congressional Democrats are showing limited support for the struggling nonprofit insurance cooperatives that sprung from the Affordable Care Act, even with Republicans targeting these businesses to further their attacks on the law.

At least 13 of the two dozen health co-ops funded by the law have failed, including a Vermont project that state regulators never allowed to begin selling insurance. A House Ways and Means panel delved into these issues Tuesday. The co-ops were meant to lower prices in the health insurance market by challenging the dominance of giants in the industry.

"I don't want to sound like an apologist for the co-ops. I was never a fan," said the No. 2 Democrat on the House Ways and Means Health Subcommittee, Mike Thompson of California, at the hearing. "What most of us wanted was the public option. That would have provided the competition needed."

The co-ops were included in the law as an intraparty compromise among Democrats after it was clear that supporters of a government-run health insurer would not prevail.

Last month, the Centers for Medicare and Medicaid Services (CMS) announced a $2.5 billion shortfall in the program and a subsequent 87 percent reduction in expected payments. At least eight co-ops announced plans to close following the CMS announcement.

Thompson and other Democrats put the blame for these collapses on GOP bids to undermine the co-ops. Jim McDermott of Washington, the ranking Democrat on the House Ways and Means health panel, said at the hearing that the co-ops' failures were a direct consequence of Republican sabotage. Democrats noted the David-Goliath nature of the challenges for co-ops attempting to compete with well-established firms. Funding for the co-op program had been dramatically whittled from the $6 billion initially provided for the program, and marketing restrictions put in place that led to the shortfall in so-called risk corridor payments, Democrats say.

"When you take the money out to make the fallback work, it seems near impossible," Thompson said. "I am surprised that any of them are still going."

The co-ops were welcomed warmly by some consumers, who had favored the concept of an insurer that would funnel any gains back to their customers. "Think locally owned credit union versus large national bank," explained the web site of Consumers Mutual, a Michigan health co-op that is one of the most recent co-ops to fail. Consumers Mutual and state regulators announced this week a plan to wind down the business.

Rep. Tom Price, R-Ga., a critic of the co-ops, took exception to Democratic comments that he said boiled down to "it's those nasty Republicans who removed all of that money" from the co-op program and caused them to fail, Instead, there was strong bipartisan support for each of three bills that stripped these funds, with Democrats crucial to the passage of each measure, he said at the hearing.

"They weren't sticking up for them either," he told CQ HealthBeat afterward.

Cuts to Co-ops

A fiscal 2011 spending package (PL 112-10) included language stripping $2.2 billion from the co-op program. That law cleared with the Senate votes of 48 Democrats and independent Joseph I. Lieberman of Connecticut, and 32 Republicans. House Democrats split 81–108, with a narrow majority rejecting the overall measure. It passed with the support of 179 Republicans.

Then Congress took $400 million from the co-op program in a fiscal 2012 spending package (PL 112-74). The Senate cleared this measure with the votes of 50 Democrats and Lieberman and 16 Republicans. In the House, it drew 149 Democratic and 147 Republican votes.

In 2013, Congress eliminated most of the remaining funds as part of a tax law (PL 112-240), leaving only about 10 percent of unobligated funds for oversight and assistance. This measure passed in the House with 172 Democratic and 85 Republican votes. In the Senate, it drew the votes of 47 Democrats, and independents Bernie Sanders of Vermont and Lieberman. Forty Republicans voted for it.

Even greatly diminished, the co-op program remains a target for GOP, while seemingly getting little Democratic support.

Both the House and Senate versions of the fiscal 2016 spending bills (HR 3020, S 1695) seeks to strip $18 million from the co-op account, likely consuming much or all of what remains. Democratic appropriators have let this proposed rescission go largely unnoticed, while fighting hard to reverse other spending cuts for other programs, such as the Title X family planning funds.

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