One little-known facet of the Affordable Care Act (better known as “Obamacare”) was the creation of non-profit health insurance cooperatives. The law requires everyone to buy health insurance, and unless you’re old enough for Medicare or poor enough for Medicaid, you’re likely going to buy it from one of the big health insurance companies. But many advocates of health care reform pointed to the profit-seeking ways of those same companies as the source of countless problems in American health care. The creation of the health co-ops and taxpayer-backed loans to go with them was offered as a sweetener to attract those on the left with a strong opposition to for-profit health care, many of whom had been hoping for a single-payer system.
Now the sweets are turning sour. The largest of the health co-ops is Health Republic Insurance of New York, which covers over 200,000 people. Or it did. After Jan. 1, it won’t cover anyone, because it’s shutting down. This follows the closing of co-ops in Nevada,Louisiana, and Iowa.The HHS Inspector General has looked into the co-ops and come up with this self-explanatory headline: “ACTUAL ENROLLMENT AND PROFITABILITY WAS LOWER THAN PROJECTIONS MADE BY THE CONSUMER OPERATED AND ORIENTED PLANS AND MIGHT AFFECT THEIR ABILITY TO REPAY LOANS PROVIDED UNDER THE AFFORDABLE CARE ACT”. (Gotta’ love the choice of the word “might affect”. I’m pretty sure that co-ops which ran out of money and shut down are not going to be fully paying back their loans from the taxpayers.)
It’s not bad news all around though. Some people did benefit from the co-ops. For instance:
However, tax records indicate its founders benefited as contractors for the company. Before hitting bottom, Louisiana Health Cooperative in 2013 alone paid more than $3.6 million to businesses linked to board members…
Beam Partners went on to be paid $3 million by Louisiana Health Cooperative in 2013 as an independent contractor for “health plan development,” according to the organization’s income tax filing for that year.
Shilling was the organization’s first CEO and a board member, according to public records. He had been CEO of Ochsner’s health insurance arm for five years before the Ochsner plan was purchased by Humana. Shilling then went on to form Atlanta consulting firm Beam Partners in 2004, according to his LinkedIn profile.
Two other health insurance consultants who filed Louisiana Health Cooperative incorporation papers with Shilling in 2011 – Alan Bayham and Mark Gentry, both of Louisiana – are listed as “associates” for Beam Partners on its website.
Also listed as a principal for Beam Partners is a consultant named David H. Smith. A man by that name is president of Kearney Street Consultants in Alpharetta, Ga., which Louisiana Health Cooperative paid nearly $672,000 in the same year for “health plan development.”
It is superficially logical to look at health insurance companies making money and conclude that if they were replaced by companies that don’t make money, the unmade profits could be transformed into cost savings for the customers. The devil, as they say, is in the details. Non-profits don’t always run so smoothly, and moreover they often end up having aspects that look a lot like profits.