The ACA authorized HHS to give startup and solvency loans to qualified applicants that intended to become nonprofit, consumer-operated and oriented health insurance issuers. According to the OIG, CMS awarded a total of $2.4 billion in loans, and as of Jan. 1, 2014, 23 co-ops offered health coverage in 23 states.
But an OIG audit of the 23 co-ops found most had not met their initial program enrollment and profitability projections as of Dec. 31, 2014. Member enrollment for 13 that provided health insurance in 2014 was considerably lower than the co-ops’ initial annual projections, and 21 of them had incurred net losses as of Dec. 31, 2014.
Low enrollment combined with net losses could impair some co-ops from repaying startup and solvency loans, according to the report.
In a written response to the OIG audit, CMS chief Andy Slavitt said the administration concurs with the findings, as well as the recommendations the OIG outlined in the report for closer oversight and clarifying standards, according to the Associated Press. He also defended the co-ops, saying they face many difficulties.
“The co-ops enter the health insurance market with a number of challenges, [from] building a provider network to pricing premiums that will sustain the business for the long term,” Mr. Slavitt wrote, according to the Associated Press. “As with any new set of business ventures, it is expected that some co-ops will be more successful than others.”
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