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CMS Chief Says Some Repayments Possible From Failed Health Co-ops

By Kerry Young, CQ Roll Call

March 10, 2016 -- A top federal health official at a hearing Thursday said it’s possible that failed insurance cooperatives created in the Democratic health care law will repay some of their startup loans. But Republicans didn't believe him.
“It is a near certainty that you are going to have a complete loss here,” Sen. Rob Portman, R-Ohio, told Centers for Medicare and Medicaid Services Acting Administrator Andy Slavitt at the  Senate Homeland Security and Governmental Affairs Committee’s investigations subcommittee hearing.
About half of the two dozen nonprofit health co-ops funded with $2.4 billion in federal loans provided through the 2010 health law have shuttered or are in the process of shutting down. CMS is coordinating with the Justice Department to see if any of the money provided to the failed co-ops will be recovered, Slavitt told the panel.
“I am reluctant to start negotiating publicly some figure, and I also think it’s very possible that I would be wrong” in making an estimate at this time, Slavitt said, before conceding that CMS doesn’t expect to recover all or 95 percent of the loans to the failed nonprofit insurers.
Sen. Ben Sasse, R-Neb., said the losses from failed co-ops have a far-reaching effect. His state saw one of the largest failures. An early star in the program, CoOportunity Health folded after attracting about 120,000 customers in Iowa and Nebraska. Surviving insurers in Nebraska have been assessed fees totaling $46.8 million last year to help cover CoOportunity’s unpaid claims, Sasse said. Nebraska’s tax revenue will be lowered by that amount because these insurers can reduce what they owe due to the forced contribution to CoOportunity’s costs, Sasse said.
“The state government will have this much less revenue to pay for state priorities like education, roads, and firefighters,” he said at the hearing.
The  co-ops remain a persistent target for Republicans in their criticism of the 2010 health law, while getting little support from congressional Democrats. No Democratic senators appeared at the hearing, which was led by the subcommittee’s chairman, Portman, and attended by Sen. Ron Johnson, R-Wis., the chairman of the Senate Homeland Security and Governmental Affairs.
Sen. Claire McCaskill of Missouri, the ranking Democrat on the investigations subcommittee, is on leave while being treated for breast cancer. Portman said that he had suggested postponing the hearing until McCaskill’s return but she told him to proceed. McCaskill intends to submit questions for the record, said Portman.
The absence of Democrats left Slavitt as the chief defender of the co-ops, arguing that they should be viewed as startup businesses operating in a tough environment.
"Clearly starting up a small insurance company is one of the biggest challenges imaginable," Slavitt said. "They face significant entrenched competitors with years of history.”
Democratic leaders had included the co-op initiative in the 2010 health law as a concession to colleagues who were disappointed that the overhaul didn’t include a government-run health plan option. The co-ops were attractive to some consumers because they were designed as nonprofits with a goal of competing against large insurers and returning savings to their customers. Evergreen Health in Maryland, one of the surviving businesses, describes itself as having been "founded by local doctors who knew that Maryland needed a new kind of health coverage." Evergreen calls itself a "company that listens to its members and provides coordinated care and personalized service, at a price that you can afford."

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