The WasteWatcher: The Staff Blog of Citizens Against Government Waste

Farewell CO-OP Number 17

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact

In an August 3, 2016 NJBiz article, the headline blared “N.J. rules helped guide Health Republic to success as Obamacare co-op!" The article goes on to praise the fact that Health Republic was “one of the seven health insurance co-ops still standing” and that its stability had a lot to do with the fact that “New Jersey’s 1992 health care reform laws were similar to the current Affordable Care Act, and allowed both insurers and actuaries to draw from prior experience to create health plans and pricing.”  The article contends that New Jersey's CO-OP is a great success story.

Well, then again … maybe not.

Forty days later, and with barely a whimper, Health Republic Insurance announced on September 12 it will be closing its doors and will not be offering healthcare plans for 2017.  Health Republic is the 17th Consumer Oriented and Operated Plan, or CO-OP, to fail.  Twenty-three CO-OPs had received more than $2.4 billion in loans from taxpayers, with Health Republic receiving $109,074,550.  Now only six CO-OPs remain.  The 17 failed CO-OPs have lost more than a total of $1.82 billion and it is unlikely taxpayers will be reimbursed.

CAGW has written about the problems with the CO-OPs before.  Instead of creating a single-payer, or government-run, healthcare plan to compete with private insurers in an Obamacare exchange, CO-OPs were created as a compromise solution.  These privately-run, member-owned nonprofits healthcare providers were supposed provide great care at low price.  But they were disadvantaged from the start and doomed to fail because of Obamacare’s over-restrictive mandates, such as placing limitations on marketing initatives and hiring individuals with experience in health insurance.  Restrictions such as these made it difficult for the CO-OPs to obtain private financial support.  Congress saw the problems with the CO-OPs almost from the start and limited taxpayers’ exposure through a series of laws, including the 2012 Taxpayer Relief Act.  A July 2013 Department of Health and Human Services Office of the Inspector General audit also showed trouble on the horizon for the CO-OPs.

According to an article in the September 13, Washington Examiner, the CO-OP lost $17.6 million in 2015 and an additional $13 million in the first quarter of 2016.  The New Jersey Department of Banking and Insurance (DOBI) will place the CO-OP under rehabilitation, subject to court approval, “because of its deteriorating financial condition.”

A September 12 N.J.Biz article attempts to provide a more optimistic vision.  While the CO-OP’s 26,000 individual customers and 9,000 small group plans will have continued insurance coverage until the end of the year, they will need to find a new insurance carrier for 2017.  What caused the CO-OP to finally collapse was it could not pay the $46.3 million it owes to the Obamacare risk adjustment program.  The program requires insurers that have healthier enrollees to contribute money to bail out insurers that have a higher percentage of sicker and higher cost enrollees.  DOBI hopes that under rehabliitation, Health Republic will be able to "return in full swing by 2018."  Who will be forced to pay-up to make this happen and any bets it will?

What are the six CO-OPs that remain?  They are Maine Community Health Options, Maryland’s Evergreen Health Cooperative, Massachusetts Minuteman Health, Inc., Montana Health Cooperative, New Mexico Health Connections, and Wisconsin’s Common Ground Healthcare Cooperative.

Which one of these will be number 18?


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