ObamaCare's Unraveling

How one new program's demise may imperil the entire system.

obamacare supreme court-cropped-proto-custom_28Another critical ObamaCare program has turned into a nightmare of mismanagement and corruption, and this debacle serves not only as a microcosm of the health care law itself, but also to illustrate how any obscure part of highly complicated and interconnected law can potentially bring down the entire system.

The name of the program is the Health Care Consumer Oriented and Operated Program (co-op). Its $2 billion dollar affiliated grant loan program has been so disastrously mismanaged that Congress has been forced to freeze all future loan funds while it investigates protocols and management of the program.

The health care co-ops were set-up in the Affordable Care Act to serve as a competing force to traditional health insurance on state exchanges, which were set-up to serve those that aren’t able to get insurance through Medicare, Medicaid, or through their employers. Health care co-ops were presented as promising options for cheap health insurance because they were set-up as non-profits.

The program is now the subject of four federal investigations including by the House Oversight and Government Affairs Committee, the Department of Homeland Security (DHS) Office of the Inspector General, and the House Energy and Commerce Committee.

Jonathan Ingram, a healthcare policy analyst with the Illinois Policy Institute, has been tracking health care co-ops, and specifically those in Illinois. He explained that while the concept of health care co-ops was written into the Affordable Care Act, the specific rules governing them were written by staff within DHS. Effectively, this means that nameless and faceless bureaucrats were deciding how health care co-ops would function.

With the loan program in flux, the fate of health care co-ops is also up in the air. Twenty-four co-ops in twenty-five states were exclusively selected by DHS to provide health insurance to compete in the health care exchanges in each of the twenty-five states.

The health-care exchanges, of which health care co-ops are so critical, have their own history of turbulence. Initially, the Obama administration planned on having states each set up their own exchanges, but starting in 2011, mostly Republican governors objected, and currently, in nearly half the states, the federal government will be forced to set-up the exchange itself.

Exchanges are supposed to be on-line and fully functional starting October 1, 2013, but all accounts make that a near impossibility in all fifty states.

Ingram said that the impact on health-care exchanges of the collapse of health-care co-ops is a state-to-state issue. Ingram said that in Illinois, there are currently only five entities offering health insurance on the exchange, making the collapse of one quite critical. He said only four entities appear on the California health-care exchange.

According to an emailed statement from the Chief Executive Officer of Land of Lincoln Health Care Co-op, Dan Yunker told Front Page Magazine that the co-op in Illinois should not be affected:

The Patient Protection and Affordable Care Act pledged $3.8 billion in funding loans to assist in establishing co-ops in every state. In all, 24 co-ops received federal approval and loans, however the remaining funding for co-ops was cut as part of the fiscal cliff agreement. Land of Lincoln Health (the co-op sponsored by MCHC) was the last co-op to receive federal approval/funding. Land of Lincoln Health’s approval to launch a consumer oriented and operated health plan and loan award was not impacted by Congress’ fiscal cliff agreement. Land of Lincoln Health is continuing to move forward in creating affordable, comprehensive insurance options for the people of Illinois. Land of Lincoln Health’s plans will be available for individuals and business owners on October 1, 2013.

Other states won’t be so lucky. According to figures provided by the HHS, a whopping 43% of all the twenty-four loans are projected to default.

In Vermont, the health care co-op Vermont Health Co-op hasn’t even been able to secure the proper license from the Vermont Department of Financial Regulation despite receiving $34 million in grant money.

Freelancers Union Co-op is a health care co-op functioning in New York, New Jersey and Oregon, and it received a $340 million loan from the program even though it was directly tied to the Freelancer’s Union Insurance Company, a relationship expressly forbidden by the Affordable Care Act.

HHS declined to respond to an email on the fate of the health care co-op program and the health care exchanges in light of this recent scandal.

As Obamcare unfolds, it’s clear that the complicated program is predicated on the smooth transition of thousands of obscure and yet interlocking programs, as this story illustrates. The failure of even one obscure program serves as a domino effect to other programs and ultimately to the entire program. Success can only be achieved if all these programs are smoothly and effectively instituted all at once, and that is now a near certain impossibility. As such, the health care co-op program serves as an apt metaphor for the law itself, a never ending sea of endless mismanagement and corruption.

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