Obamacare's Solyndra? Oversight Panel Expands Co-Ops Probe, Renews Document Demand To HHS

Citing worries that "taxpayers will lose a significant amount of the money," House Committee on Oversight and Government Reform officials are significantly expanding their probe of the $2 billion Obamacare loan program to fund new health insurance co-operatives to compete with established private-sector firms in 24 states.

Committee Chairman Rep. Darrell Issa, R-Calif., requested a lengthy list of documents in a March 25, 2013, letter to officials with eight of the groups starting co-ops. Together, the eight have received more than $657 million in low-interest loans that must be repaid at a future date.

The requested documents include details of how they've spent the federal funds to date and copies of "all documents and communications" their employees have exchanged with Obama administration officials in the White House and the U.S. Department of Health and Human Services.

Also signing the letter were subcommittee Chairmen Rep. Jim Jordan, R-Ohio, and Rep. James Lankford, R-Okla.

The co-op program is overseen by the Center for Consumer Information and Insurance Oversight in HHS.

The eight new co-op groups under the committee's focus are CoOportunity Health of Iowa; Maine Community Health Options; Louisiana Health Cooperative; Illinois-based Land of Lincoln Health Inc.; Kentucky Health Cooperative; Evergreen Health Cooperative in Maryland; Montana Health Cooperative; and HealthyCT in Connecticut.

The committee previously contacted Hospitality Health, based in Nevada and FreeLancers Insurance Co., which is establishing co-ops in New York, New Jersey and Oregon, bringing the total of co-ops being reviewed to 13 of the 24 to be established. The 10 groups establishing the 13 new co-ops have received $1.06 billion in federal loans.

In a second March 25 letter, the oversight committee leaders sternly reminded HHS Secretary Kathleen Sebelius that it had yet to receive any of the documents about the Obamacare co-op program requested from her last October in a letter signed by Issa and Rep. Trey Gowdy, R-S.C., chairman of the oversight panel's Subcommittee on Health Care, the District of Columbia, Census and the National Archives.

A Feb. 12, 2013, response signed by Marilyn Tavenner, acting administrator of the Centers for Medicare and Medicaid Services, or CMS, "took nearly four months to prepare" but "failed to provide any of the information the committee requested."

"We remain concerned that taxpayers will lose a significant amount of the money awarded through the co-op program," Issa, Lankford and Jordan said in the letter to Sebelius.

"According to the Office of Management and Budget, taxpayer losses are projected at 43.2 percent for the loans given out through the co-op program," they said, noting that the "mean average taxpayer loss for other non-educational loans made as part of the federal government's Direct Loan Program is 8.3 percent."

Sebelius was given an April 8, 2013, deadline and was told that "if the department does not produce the requested documents by this time, we will be forced to consider use of the compulsory process."

The compulsory process would include issuing a congressional subpoena, which the Obama administration would then have to decide whether to comply with the committee's request or challenge it in federal court.

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Fiscal Deal Kills New Funding For Health Law’s Co-Ops

Going, going, gone.

The fiscal cliff deal, approved by Congress on New Year’s Day, eliminates most of the more than $1.4 billion in remaining funding from the federal health law for new nonprofit, customer-owned health plans designed to compete against the major for-profit insurers.

Photo by Aaron Sumner via Flickr

That means the Obama administration won’t be able to approve loans to any additional co-ops. In the past two years, the Department of Health and Human Services has awarded nearly $2 billion in loans to 24 proposed state co-ops. Those loans won’t be affected by the cut.

“We were  blindsided by the elimination of funds,” said John Morrison, president of the National Alliance of State Health Cooperatives. “The health insurance industry is getting its way here by torpedoing  co-ops in the 26 remaining states. This is not about budgets; it is about those health insurance giants killing competition at the expense of millions of Americans who will pay higher premiums because of it.”

But some House Republicans have said the co-ops were a way for the administration to reward its political friends. Sponsors of the co-op plans already underway include the Freelancers Union in New York, a farmers’ union in Colorado and the Connecticut State Medical Society.

Critics also have been skeptical the co-ops could compete with more established insurers, such as Aetna and UnitedHealthcare.

“Starting a new health plan is a risky proposition,” said Peter Kongstvedt, a McLean, Va.- based health care consultant. He said consumers already have sufficient choice of plans in most markets and won’t miss having the additional co-ops.

Proponents of the co-ops say such plans could offer lower premiums because they don’t have to generate profits for shareholders. Under the law, co-op plans must apply any surpluses to lowering rates or improving benefits or quality for their members. The co-ops are scheduled to open by next year.

In testimony before Congress last year,  Morrison called skepticism about co-ops’ ability to compete ”naive,” noting, “The large carriers are saddled with stockholder demands for profit, large overheads, antiquated legacy processing systems and other inefficiencies.”

Initially, the health law allocated $6 billion to help co-ops start up and meet state  insurance solvency requirements. In 2011, Congress reduced that funding to $3.4 billion as part of broader budget cuts.

More than two dozen applicants were applying for co-op funding when the money was eliminated, Morrison said. HHS officials did not return calls for comment.

The deal approved Tuesday leaves 10 percent of the remaining co-op funds to cover the administrative costs connected with the 24 plans already launched.

This entry was posted on Wednesday, January 2nd, 2013 at 4:37 pm.

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