Hillary Clinton's Public Option: Recycling Failed Policy

- July 12, 2016

While ObamaCare Co-Ops Fail At A Startling Clip, Clinton Would Go Further In Backing The So-Called Public Option, For Political Reasons


  • With the recent failures in Oregon and Connecticut, 15 of the 23 ObamaCare Exchange co-ops have now failed.
  • The co-ops had been offered as a compromise measure to win the support of single-payer advocates who supported the so-called public option.
  • Despite these failures, Hillary Clinton wants to go further, and in her bid to win over Sanders backers, has pledged support for the public option.
  • Many view Hillary Clinton's public option as an already failed policy proposed only for political gain as the public options will be vulnerable to similar financial stresses faced by the co-ops.



ObamaCare's Latest Co-Op To Close Was Oregon's Second Co-Op Which Announced It Was Closing By The End Of The Month Due To Financial Struggles. "Oregon regulators are moving to take control of a federally funded health insurer, Oregon's Health CO-OP, saying its finances put the well-being of 20,000 Oregon consumers at risk. The state is placing the nonprofit insurer into receivership and will dissolve it. Current members are encouraged to find other plans by July 31, when the CO-OP's plans expire." (Nick Budnick, "Oregon To Take Over Troubled Nonprofit Health Insurer As 20,000 Must Change Plans," Portland Tribune , 7/8/16)

  • Oregon's Co-Op, Like Many Across The Nation Are Failing Partly Due To A Change In The Risk Pool Payments Which Are Supposed To Mitigate Effects From Cherry Picking. "The insurer lost $18.4 million last year, according to the state. Last week the federal government announced that the CO-OP needs to pay more than $900,000 into a federal risk adjustment program - quite a change from the $5 million that the insurer had earlier been expecting to receive from the federal government this year." (Nick Budnick, "Oregon To Take Over Troubled Nonprofit Health Insurer As 20,000 Must Change Plans," Portland Tribune , 7/8/16)
  • Oregon's First Co-Op Closed In 2015 Due To Financial Insolvency Partly Caused By A Faulty Risk Corridor Program. "An Oregon health insurance co-op is withdrawing from the 2016 market and has begun a 'wind down of business,' citing the federal government's recent announcement that it will only honor 12.6 percent of insurance companies' risk corridor payment. This means the 15,000 members the nonprofit insurer, Health Republic, currently serves will have to shop for new coverage at come open enrollment on Nov. 1. About 10,000 of the members are employees of small businesses, according to a press release. (Saerom Yoo, "Oregon Insurance Co-Op To Close, Cites ACA Shortfall," The Statesman Journal , 10/19/15)

Connecticut's ObamaCare Co-Op Also Failed This Month Due To Financial Instability From A $13.4 Million Federal Bill. "Connecticut's financially 'unstable' Obamacare health-insurance co-op was placed under state supervision on Tuesday, as regulators said 40,000 people covered by the company will ultimately have to find new plans for the coming year. HealthyCT is the 14th of 23 original Obamacare co-ops to fail since they began selling health plans on government-run Affordable Care Act insurance exchanges. Several of the other remaining co-ops, at least, are believed to be on shaky financial ground. Until last week, the nonprofit HealthyCT had 'adequate capital and sustainable liquidity' - but that fell apart Thursday with a federal requirement that hit HealthyCT with a $13.4 million bill, according to the Connecticut Insurance Department." (Dan Mangan, "'Financially Unstable' Connecticut Obamacare Co-Op Now Under State Supervision," CNBC, 7/5/16)

  • Connecticut Co-Op's Financial Stress Is In Part Due To The Failure Of The Risk Management Program Designed To Mitigate The Effects of Insurer Cherry Picking. "The risk adjustment program is designed to spread out the financial risk of insuring people with Obamacare plans by redistributing money from insurers with healthier customers to companies with sicker customers. But smaller insurers, particularly co-ops, have sometimes been strained by the program because their balance sheets are not large enough to cover the costs from it. Those insurers also have come under financial stress because the Obama administration has withheld payments from companies under the risk corridor program." (Dan Mangan, "'Financially Unstable' Connecticut Obamacare Co-Op Now Under State Supervision," CNBC, 07/05/16)

15 Of the 23 Original Co-Ops Have Failed. "As for the profits - well, insurer profits were never anything like the lavish riches that public-option supporters imagined, but it's particularly crazy to speak of this now, because overall, insurers have been losing boatloads of money on their exchange policies. Fully 15 of the 23 co-ops - which were also supposed to be able to offer attractive policies by cutting out those obscene profit margins -- have been shut down, and many of the rest look as if they will eventually follow suit. If the public-option insurer really does have to cover all its costs, it could well end up on the high side of the current markets." (Megan McArdle, "The Public Option: It's Baaaaaaaack!," Bloomberg View, 7/12/16)

Over The Weekend, Clinton Came Out In Favor Of A Public Option

Over The Weekend, Hillary Clinton Formally Endorsed Creating A Public Option In ObamaCare. "Hillary Clinton willformally reaffirm on Saturday her support for creating a 'public option' within Obamacare and allowing people to enroll in Medicare at age 55, campaign aides have told The Huffington Post. The presumptive Democratic presidential nominee will also call for a substantial increase in funding in medical clinics that serve low-income Americans." (Jonathan Cohn, "Clinton Formally Backs Public Option In Bid For Sanders Supporters," The Huffington Post, 7/9/16)

· "While Clinton Has Long Supported The Creation Of New Government-Run Insurance Options, And Reiterated That Support Several Times This Year, This Is The Campaign's First Formal Endorsement Of The Idea." (Jonathan Cohn, "Clinton Formally Backs Public Option In Bid For Sanders Supporters," The Huffington Post, 7/9/16)

· Clinton's Campaign Touted She Has Supported A Public Option Plan "During This Campaign And Going Back To Her 2008 Presidential Campaign …" "Clinton will also affirm her commitment to give Americans in every state the choice of a public-option insurance plan, something she has supported during this campaign and going back to her 2008 presidential campaign, as well as allowing individuals below the Medicare age to opt in to the program - a proposal she first cosponsored legislation on in 2001 as a senator - by providing the option to those 55 and older." (Hillary For America, "Additional Health Care Proposal Affirms Hillary Clinton's Career-Long Fight To Expand Access To Care And Effect Universal Coverage," Factsheet , 7/9/16)

The Public Option Is Viewed As An Extension Of The Failing ObamaCare Co-Ops

Former Health And Human Services Secretary Kathleen Sebelius Viewed Co-Ops As A Substitute For The Public Option During Original ObamaCare Negotiations. "Murmurs from the White House that the government-sponsored public insurance option could be negotiated or even dropped from President Obama's health care reform plan in favor of nonprofit cooperatives has left the medical community abuzz and the public a bit confused. The talk started Saturday after Obama indicated during a town hall meeting in Colorado that publically funded health insurance was not the centerpiece of his reform plan but 'only a sliver' of the solution. And on Sunday, Health and Human Services Secretary Kathleen Sebelius said that co-ops are being considered as an alternative way to fulfill the president's goal of creating more competition in the health insurance industry." (Lauren Cox, "'Public Option Or Co-Op? Experts Sound Off," ABC News, 8/18/09)

  • Sebelius Said That The Public Options And Co-Ops Performed Similar Essential Functions Because They Offered Competition To The Private Market. "Sebelius said the White House would be open to co-ops instead of a government-run public option, a sign Democrats want a compromise so they can declare a victory on the must-win showdown. 'I think there will be a competitor to private insurers,' she said. 'That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing. We need some choices, we need some competition.'" ("Public Option Up In The Air After Comments," CBS News, 8/16/09)

During The Initial ObamaCare Debate, Former Senator Kent Conrad (D-ND) Believed That Co-Ops Would "Accomplish Much Of The Same As The Public Option." "'The hard reality is, the reason I was asked to see if I could come up with [an alternative] is that the public option does not have enough support in the Senate to pass,' Conrad said in a recent interview. 'It's an alternative that would accomplish much of what's appealing [in the public option] and not have the fierce opposition of virtually every Republican and some Democrats.' It remains to be seen whether the co-op alternative would win any support for the legislation in Congress." (David Hilzenrath and Alec MacGillis, "Health Cooperatives Gain Backing As Alternative To Public Option," The Washington Post, 8/18/09)

Co-Ops "Were A Compromise" With Single-Payer Advocates To Garner Support For ObamaCare In The Congress. "When the ACA was enacted in 2010, the Consumer Operated and Oriented Plans were a compromise to appease congressional liberals who had wanted a new public insurance program for Americans unable to get health benefits at work." (Amy Goldstein, "Financial Health Shaky At Many ObamaCare Insurance Co-Ops," The Washington Post , 10/10/15)

  • "The CO-OP Program Was Created Under Obamacare To Establish Federally-Backed Non-Profit Insurance Companies, A Nod To Supporters That Wanted A Public Option. But the program - just like the President's health care law - was doomed from the start because it forced the federal government to loan billions of taxpayer dollars to 'start up' companies that had no experience delivering health insurance." ("Another Co-Op Closes Because Of Obamacare Failures, Committee On Ways And Means, 5/27/16)

According To Dr. Stephanie Woolhandler, A Healthcare Expert Who Spoke At The Democratic National Convention Platform Hearing, The Failed ObamaCare Co-Ops Are A Substitute For Clinton's Proposed Public Option. DOCTOR STEPHANIE WOOLHANDLER: "So you'll definitely get adverse selection which is what happens to you if somebody cherry picks and you don't. That's how the coops went under. I mean many of you don't know what the coops were. But when the public option failed it was put forward-let's try these non-profit coops and it would kinda be like a public option. And they got these good guys to go out there and set up these plans and it turned out the plan in New York had every single cancer patient, every single Sloan Kettering cancer patient enrolled in any plan ended up in the coop plan because all of the for profit plans managed to avoid those patient by not covering Sloan Kettering Cancer center, that's our leading cancer center in NY. So they have lots of ways to cherry pick and you can write it on a piece of paper that private insurance cant cherry-pick but that's not the same thing as actually avoiding cherry-picking." (Steffie Woolhandler, Democratic National Convention Platform Hearing, 06/17/16)

  • Stephanie Woolhandler Is A Staunch Supporter Of Sanders' Healthcare Platform And Primarily Advocated For A Single Payer System During The Platform. "Single-payer health care is the most effective route to universal coverage, argued Stephanie Woolhandler, co-founder of Physicians for a National Health Program. Government spending on health programs would initially rise, but it would later be offset by a reduction in premiums and out-of-pocket costs, she said. A Medicare buy-in or public option wouldn't work as effectively because the system would not realize the same administrative and drug-cost savings available through a single-payer system 'I think we, like the nurses, feel you just can't pretend we've solved the problem here with the Affordable Care Act,' Woolhandler said. 'What we have now is not a solution. We still have people dying. We still have people not getting care.'" (Marry Ellen Mcintire, "Some Democrats Aren't Giving Up On Universal Healthcare," Morning Consult, 6/20/16)

The Public Option Would Promote "Cherry-Picking" Leading To Their Demise. DOCTOR STEPHANIE WOOLHANDLER: "The Public Option was studied by the Congressional Budget Office in 2009 as part of the ObamaCare legislation, they also said that there would be cherry-picking." (Steffie Woolhandler, Democratic National Convention Platform Hearing, 06/17/16)


Ohio's ObamaCare Co-Op Failure In May of 2016 Cancelled policies On Roughly 22,000 People. "Yesterday, the Ohio Department of Insurance announced it was closing InHealth Mutual, one of Obamacare's Consumer Operated and Oriented Plan (CO-OP) programs, which was created with more than $129 million in taxpayer dollars to provide health insurance. Nearly 22,000 Ohioans now find themselves losing their health plan with a short amount of time to find a new option. And news reports reveal InHealth lost $80 million last year despite being under "enhanced oversight" by the federal government." ("Another Co-Op Closes Because Of Obamacare Failures, Committee On Ways And Means, 5/27/16)

  • Ohio's Co-Op Also Was Hurt By Failure Of The Risk Corridor Program. "Co-ops are failing because Congress has refused to fund a risk-abatement program that was part of the original plan for co-ops in the law, the board resolution said. InHealth would have received $47 million and been solvent if the program had been funded. The absence of the law's planned payments for taking high-risk members was cited in the failure of other state co-ops. Meanwhile, federal rules forced it to accept extremely ill members outside of regular enrollment who were assigned to it by the U.S. Department of Health and Human Services. Those 91 members incurred $9 million in claims in 2015." (Carrie Ghose, "Ohio Shutting Down State's Obamacare Nonprofit Co-Op InHealth - Claims Paced $3M Per Week," Columbus Business First , 5/26/16)

New York's ObamaCare Co-Op Failed "disrupting Coverage For More Than 200,00 New York Residents." "The nation's biggest nonprofit health insurer spawned by the Affordable Care Act has been ordered to shut down as it reels toward insolvency, disrupting coverage for more than 200,000 New York state residents and becoming the fourth such co-op to collapse in recent months." (Amy Goldstein, "New York Health Co-Op Ordered To Close Down," The Washington Post , 9/25/15)

Nebraska And Iowa's Failed ObamaCare Co-Op Resulted In Nearly 120,000 People Losing Their Coverage. "In November 2014 CoOportunity Health announced that her platinum plan would no longer be offered. She chose another plan-and not long thereafter received a third cancellation letter, notifying her the co-op was going out of business and instructing her to find a new insurance provider before the end of the open enrollment period on Feb. 15, 2015. As a result of CoOportunity Health's liquidation, nearly 120,000 Nebraskans and Iowans lost coverage. And that's just one plan." (Adrian Smith, "ObamaCare's Cascading Co-Op Failures," The Wall Street Journal, 11/2/15)

Arizona's ObamaCare Co-Op Failed Causing 59,000 People To Look For New Coverage. "About a third of the Arizonans who bought health insurance on the federal marketplace for 2015 will have to find a new provider following action by state insurance regulators to suspend the state's nonprofit insurance co-op's ability to sell new policies over concerns it could fail. The suspension of Meritus Health Partners means about 59,000 people will need new insurance unless the order is lifted. More than 50,000 of those people bought their plans through the marketplace." ("Health Insurance Co-Op Order means 59,000 Must Find Coverage," The Associated Press, 11/2/15)

Colorado's ObamaCare Co-Op Announced That It Would Close Soon, Forcing Over 80,000 Coloradans To "Find A New Insurer" In 2016. "Colorado's biggest nonprofit health insurer announced its closure Friday, forcing nearly 83,000 Coloradans to find a new insurer for 2016. Colorado HealthOP announced Friday that the state Division of Insurance has de-certified it as an eligible insurance company." (Kristen Wyatt, "Largest Health Insurer On Colorado Exchange Collapses," The Associated Press, 10/16/15)

Kentucky's ObamaCare Co-Op Failed Leaving 51,000 People To Find New Insurance. "The Kentucky Health Cooperative announced on Friday it is going out of business and will not enroll new members next year, leaving 51,000 members to find other coverage. It had the second-largest co-op enrollment in the country, garnering 75% of people who enrolled in coverage through the state's health exchange." (Grace-Marie Turner, "400,000 Citizens To Lose Health Insurance (Again) Because Of Obamacare Co-Op Failures," Forbes , 10/10/15)

Michigan's ObamaCare Co-Op Also Failed In 2015. "More than half of the nonprofit health insurance co-ops formed through the Affordable Care Act are now off the market for the coming year, with the last-minute departure of a plan in Michigan. On Tuesday, two days after the start of the new enrollment season in insurance exchanges created under the health-care law, the Web site of Michigan's Consumers Mutual Insurance posted notice that it will not sell coverage for 2016." (Amy Goldstein, "More Than Half Of ACA Co-Ops Now Out Of Insurance Marketplaces," The Washington Post , 11/3/15)

Louisiana's Obamacare Co-Op Collapsed In July Of 2015. "In July, Louisiana's co-op revealed it was shutting down." (Amy Goldstein, "Financial Health Shaky At Many ObamaCare Insurance Co-Ops," The Washington Post , 10/1015)

Nevada's ObamaCare Co-Op Has Also Shuttered In 2015. "Amid this increased monitoring, one co-op has folded, stranding its members, and four others are preparing to close in late December. They include the Nevada Health Co-Op, which was initially among a top tier that federal officials had regarded as best poised to succeed." (Amy Goldstein, "Financial Health Shaky At Many ObamaCare Insurance Co-Ops," The Washington Post , 10/1015)

In 2015, Utah And South Carolina's ObamaCare Co-Ops Failed In Close Succession Of Each Other. "Last week came news that South Carolina's co-op will be closed, followed this week by the announcement that Utah's co-op is also being shut down." (Ed Haislmaier, "Why Obamacare Co-Ops Are Failing At A Rate Of Nearly 50%,"Forbes , 10/29/15)

After Receiving A Loan Of $73.3 Million, Tennessee's ObamaCare Co-Op Failed. "Other collapsed co-ops and their loan amounts include: $65.8 million to Louisiana Health Cooperative, $65.9 million to Nevada Health CO-OP, $265 million to Health Republic Insurance of New York, $146 million to the Kentucky Health Cooperative, $73.3 million to Tennessee's Community Health Alliance." (Adrian Smith, "ObamaCare's Cascading Co-Op Failures," The Wall Street Journal, 11/2/15)

Co-Ops Have Cost The American People More Than The Worst Estimates

CMS Administrator Andy Slavitt Was Questioned By Senate Officials On "The Roughly $1.2 Billion In Government Loans That Went To The Failed Co-Ops." "The Senate Finance Committee on Thursday questioned Andy Slavitt, the acting administrator of the Centers for Medicare and Medicaid Services (CMS), about the roughly $1.2 billion in government loans that went to the failed co-ops and why the administration did not pick up on problems sooner." (Peter Sullivan, "Lawmakers Grill Obamacare Official Over Co-Op Failures," The Hill, 1/21/16)

  • Slavitt Said The Administration Was Working To Recover The Loans But Admitted They Did Not Expect To Get All Of The Money Back. "Slavitt said that CMS is working with the Department of Justice on recovering the loans to failed co-ops, but the administration has acknowledged that it will not get all of the money back. Paying the federal government back, as opposed to claims or other expenses, tends to be a low priority for a co-op in receivership." (Peter Sullivan, "Lawmakers Grill Obamacare Official Over Co-Op Failures," The Hill, 1/21/16)

According To A Senate Investigative Report, By The End Of 2014, Cumulative Losses For The CO-OP's Were Four Times Greater Than The Expected Amount, Exceeding Even The Worst Case Scenario Projected For The Programs. "Cumulatively, by the end of 2014, the failed CO-OPs exceeded their projected worst-case-scenario losses by at least $263.7 million-- four times greater than the expected amount. The CO-OPs' enrollment numbers were similarly alarming. According to the 2014 reports they submitted to HHS, five of the failed CO-OPs dramatically underperformed enrollment expectations (leading to insufficient income for premiums), while five others overshot their enrollment projections (which also causes losses due to underpriced premiums). HHS was aware of these problems in early 2014, but took no corrective action and continued to disburse loans to the distressed CO-OPs." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)


The Huffington Post Headline: "Clinton Formally Backs Public Option In Bid For Sanders Supporters" (Jonathan Cohn, "Clinton Formally Backs Public Option In Bid For Sanders Supporters," The Huffington Post, 7/9/16)

Hillary Clinton's Public Option Healthcare Proposal Is An Attempt To "Broaden Her Appeal To Liberals Energized By Sanders' Idealistic Campaign." "It remains unclear how many states might be interested in a public option, which would likely trigger a sharp backlash from the deep-pocketed insurance industry. This fall Colorado voters will decide on an even more ambitious change, a state-run system that would cover most residents. By supporting health care activism at the state level, Clinton may be able to broaden her appeal to liberals energized by Sanders' idealistic campaign. Incremental improvements to President Barack Obama's health care law that Clinton has proposed aren't fulfilling to liberals, said Robert Blendon, a professor at the Harvard T.H. Chan School of Public Health, who follows public opinion on health care. 'What's exciting to them is not just adding benefits,' he said. 'It's offering some sort of public alternative to current private insurance.'" (Ricardo Alonso-Zaldivar and Dave Gram, "For Dems, A Stepping Stone To Common Ground On Health Care," The Associated Press, 06/20/16)

"Sanders Signaled He May Endorse Clinton Soon, After Pressuring Her For The Last Month Into Moving Closer Toward His Policy Positions On Healthcare And Education." "Sanders signaled he may endorse Clinton's presidential bid soon, after pressuring her for the last month into moving closer toward his policy positions on healthcare and education." (Jessie Hellmann, "Sanders Moves Toward Endorsement After Clinton Health Proposal," The Hill, 7/9/16)

  • The Public Option Is A Leftward Lurch To Please Bernie Sanders. "Both Clinton and Sanders have previously supported a public insurance option at the national level. But opposition from moderate Democrats kept that proposal out of the final health overhaul law. Sanders now is focused on putting his stamp on the Democratic platform, hoping to steer the party to the political left. His campaign says he'll keep pushing for his national health care plan, and won't settle for state experimentation as the last word. However, policy director Warren Gunnels said Sanders would definitely support a state public option. 'Anything that makes health care more affordable for Americans is something that Senator Sanders supports,' Gunnels said." (Ricardo Alonso-Zaldivar and Dave Gram, "For Dems, A Stepping Stone To Common Ground On Health Care," The Associated Press, 06/20/16)

Steve McMahon, A Democratic Consultant, Said The Public Option Is An Example Of How The "Bernie Sanders's Campaign Is Having An Effect On Hillary Clinton's Policies." "'From a progressive point of view, that's exactly what was hoped for and that is exactly what is happening.' The idea of allowing people to buy in to Medicare has been discussed in policy circles and in Congress for decades. Mrs. Clinton's husband, former President Bill Clinton, floated a similar proposal in 1998, including it in his State of the Union address that year. The strategy has been embraced by many advocates of single-payer health care as a way to move more Americans into the existing government system. An incremental expansion of Medicare was the hoped-for strategy of Medicare's original authors. But it is a new idea in Mrs. Clinton's presidential campaign." (Alan Rappeport And Margot Sanger-Katz, "Hillary Clinton Takes A Step to the Left on Health Care," The New York Times, 05/10/16)


Before It Was Called ObamaCare It Was Called HillaryCare. CLINTON: "Before it was called 'Obamacare,' it was called 'Hillarycare.' As you remember, I fought really hard. Insurance companies and drug companies spent millions against me." (Sec. Hillary Clinton, CNN 2016 Democratic Primary Presidential Town Hall, Derry, NH, 2/3/16)

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