Obamacare co-ops being created behind closed doors

By |
News,Watchdog,Richard Pollock

Secrecy shrouds President Obama's $2 billion program to launch 24 new co-ops designed to compete with private insurance companies under the chief executive's landmark health care reform.

An obscure agency in the U.S. Department of Health and Human Services has awarded loans of all but $100 million of the funds appropriated under President Obama's health care overhaul for the new organizations, known as Consumer Operated and Oriented Plans.

That worries some in Congress, including Rep. Marsha Blackburn, R-Tenn., who told The Washington Examiner that "we want to know, what's their due diligence, what's their process, how are they arriving at these decisions? What are the protections in place for policyholders? Where are the protections for the U.S. taxpayer?"

The Center for Consumer Information and Insurance Oversight, or CCIIO, approved applicants for the federal money even though few have any experience in providing health insurance to consumers. Under the law, the loans must be repaid.

CCIIO officials have not made public their criteria for evaluating loan applicants. Those officials declined to be interviewed.

The co-ops were proposed during the health care reform debate in Congress by then-Sen. Kent Conrad, D-N.D., as an acceptable alternative to the single-payer public option preferred by many Senate Democrats.

A 15-member panel set up by Obama's health care reforms to oversee the loans held only three public meetings, then disbanded 21 months ago. HHS paid consulting firm Deloitte $2.4 million to review loan applications, according to USAspending.gov. A Deloitte spokesman declined to comment.

The lack of openness became public last December when CCIIO denied the loan application of Illinois-based SimpleHx. "I really don't know why they choose one over the other," Coe Schlicher, a SimpleHx principal, told The Washington Examiner. "We have not found a way to gain access to the review process notes or the results of their scoring system."

Congress also has been kept in the dark. In an April 2012 letter, four leaders of the House Energy and Commerce Committee demanded that HHS produce information about the eligibility standards and decision-making process used for evaluating co-op loan applicants.

And in May 2012, Sens. Orrin Hatch, R-Utah, and Michael Ezni, R-Wyo., asked for details about the program from HHS Secretary Kathleen Sebelius. Sebelius has responded to neither request.

Congressional leaders point to a 2013 Office of Management and Budget analysis that projected that as many as 43 percent of the co-ops could default. If that happens, taxpayers will foot the bill, as they did with bankrupt companies like Solyndra under Obama's clean energy subsidies.

Since 2010, a wary Congress has whittled down the $6 billion the administration originally requested for the co-ops. Last year lawmakers reduced the authorized amount to $3.8 billion. During the recent "fiscal cliff" negotiations, Congress cut it nearly in half again, limiting the administration to $2 billion. The 24 approved co-ops can continue, however, and some have announced they will begin offering insurance as early as this October.

Health co-ops do not have an encouraging record. Efforts in California, Texas, Arizona and Florida swiftly faltered, according to the National Conference of State Legislatures.

Thomas Scully, a former top HHS appointee under President George W. Bush, said transparency could reassure taxpayers that the co-ops are financially stable.

"You should have total transparency for something like that to make sure the groups are qualified," Scully told The Washington Examiner.

Richard Pollock is a member of The Washington Examiner's Watchdog reporting team.

Richard Pollock is a member of The Washington Examiner's Watchdog reporting team.

View article comments Leave a comment