Contribute
CONNECT:

research

Obama Failed To Correct Problems With Co-Ops Despite Numerous Warnings

- March 11, 2016

Senate Report: HHS Failed To Exercise Good Stewardship Of Taxpayer Resources. "The Senate Permanent Subcommittee on Investigations (PSI) has completed an investigation of that failure-and whether HHS exercised good stewardship of public money when it poured billions of dollars into these insurance startups. Our investigation revealed that it did not. HHS was alerted to weaknesses in the failed CO-OPs' business plans and financial forecasts before it approved their initial loans; failed to use major accountability and oversight tools available to it throughout 2014 even though it knew of the CO-OPs' severe financial distress; continued to disburse loans to failing CO-OPs despite warning signs; and allowed CO-OPs to continue to book risk corridor payments as assets despite credible warnings that those payments would not materialize. We summarize some of our key findings below." ("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 12 Failed Co-Ops "Ran Up More Than $1.4 Billion In Losses" Over Just Two Years. "The financial toll of this failed experiment is much steeper than has been previously reported. The twelve closed CO-OPs ran up more than $1.4 billion in losses over just the two years they sold plans. Based on the latest balance sheets obtained by the Subcommittee, the failed CO-OPs' currently estimated non-loan liabilities (including unpaid medical bills) exceed $1.13 billion-which is 93% greater than their $585 million in reported assets. In addition, the CO-OPs' debt to the U.S. government stands at over $1.2 billion. Prospects for repayment are dim." ("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 Report Discovered That The Co-Ops Lost "Money At Rates Far Worse Than Their Worst-Case Projections" And HHS "Barely Used The Corrective Action Or Enhanced Oversight Tools Available To It." "The Subcommittee's investigation focused on HHS's decision to approve the failed CO-OPs and HHS's management and monitoring of its multibillion-dollar CO-OP loan portfolio. The investigation reveals that HHS approved the failed CO-OPs notwithstanding flaws in their business plans. Once the CO-OPs began losing money at rates far worse than their worst-case projections, HHS barely used the corrective action or enhanced oversight tools available to it. HHS eventually approved additional solvency loans in an attempt to save failing CO-OPs, but again did so despite obvious warning signs. The end result was to exacerbate losses that will now be shouldered by taxpayers, doctors, and others - even as more than 700,000 consumers were forced to find new health insurance plans." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

  • 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. "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 OBAMA ADMINISTRATION IGNORED WARNINGS THAT CO-OPS WERE SET TO FAIL OR USE CORRECTIVE MEASURES ONCE THE SCOPE OF THE PROBLEM BECAME APPARENT

HHS Was Warned In 2012 That The Co-Ops Had Major Problems Including Enrollment Strategy Weakness, Budget And Financial Planning Weaknesses, And Management Weakness

The Investigation Discovered That HHS Approved The Co-Ops, Ignoring Reports That They Would Not Succeed. "The Subcommittee's investigation focused on HHS's decision to approve the failed CO-OPs and HHS's management and monitoring of its multibillion-dollar CO-OP loan portfolio. The investigation reveals that HHS approved the failed CO-OPs notwithstanding flaws in their business plans. Once the CO-OPs began losing money at rates far worse than their worst-case projections, HHS barely used the corrective action or enhanced oversight tools available to it. HHS eventually approved additional solvency loans in an attempt to save failing CO-OPs, but again did so despite obvious warning signs. The end result was to exacerbate losses that will now be shouldered by taxpayers, doctors, and others - even as more than 700,000 consumers were forced to find new health insurance plans." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

  • "HHS Approved The Failed CO-OPs Despite Receiving Specific Warnings From A Third-Party Analyst About Weaknesses In Their Business Plans." "First, HHS approved the failed CO-OPs despite receiving specific warnings from a third-party analyst about weaknesses in their business plans. Before it approved the now-failed CO-OPs, HHS retained Deloitte Consulting LLP to evaluate the CO-OPs' loan applications and business plans. Deloitte's analysis, reviewed by the Subcommittee, notified HHS of several significant weaknesses in the CO-OPs' business proposals." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

A Senate Report Revealed That "HHS Knew That There Were Significant Problems In The Enrollment Plans Of 7 Of The 12 Failed CO-OPs Well Before HHS Approved Their Loan Applications." "Enrollment is a central component of any health insurer's business plan. As outlined in Part III, the enrollment projections for all but two of the failed CO-OPs' business plans diverged dramatically from reality. Based on our review of Deloitte's evaluations, it is clear that HHS knew that there were significant problems in the enrollment plans of 7 of the 12 failed CO-OPs well before HHS approved their loan applications." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

A Report By Deloitte Detailed The Inadequate Budget Plans Proposed By The Co-Ops. "As part of their applications, all prospective CO-OPs submitted operating budgets and pro forma financial statements (that is, long-term projections of revenue, profit, assets, liabilities, etc.). HHS instructed Deloitte to evaluate the proposed budgets for completeness as well as 'reasonableness and cost-effectiveness.' The Department told Deloitte to review the pro forma financial statements for completeness, clarity of assumptions, and consistency with each COOP's business plan.115 In its review, Deloitte identified numerous problems ranging from comparatively minor issues, such as omitting needed expenses, to more significant concerns, like presenting an unreasonable budget." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

  • Evaluate The Loan Applications And Business Plans Of The CO-OPS. "HHS retained Deloitte Consulting LLP to evaluate loan applications and business plans submitted by health insurance CO-OPs seeking a federal award. Deloitte reviewed each Grant Application for compliance with the 'essential CO-OP Program [Funding Opportunity Announcement] criteria established by CMS for funding.' 91 According to the funding announcement, CMS 'relied on the ACA, the CO-OP final rule, the proposed rule for exchanges on standards for qualified health plans, and the final report of the CO-OP Advisory Board to establish the review criteria' discussed in detail below." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

HHS Was Informed About "Key Leadership Position Gaps Or Thin Industry Expertise For All Of The 12 Failed CO-Ops." "Each CO-OP loan applicant was required to 'identify its management team, explain their qualifications and experience, and submit an organizational chart and detailed position descriptions, including the qualifications required for each position.' Based on its review of this portion of the CO-OP's business plans, Deloitte consultants expressed concern over key leadership position gaps or thin industry expertise for all of the 12 failed 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 Senate Report Confirmed That HHS Failed To Take Corrective Action In 2014 When Co-Ops Performed Worse Than Predicted

"Even Though HHS Was Aware Of Serious Financial Distress Suffered By The CO-OPs In 2014, It Failed To Take Any Corrective Action Or Enhance Oversight For More Than A Year." "Second, even though HHS was aware of serious financial distress suffered by the CO-OPs in 2014, it failed to take any corrective action or enhance oversight for more than a year. The CO-OP loan agreements armed HHS with significant accountability tools for borrowers who were missing the mark, but here HHS took a pass. Inexplicably, for over a year, the agency took no corrective action, nor did it put any CO-OP on enhanced oversight. Five of the 12 failed CO-OPs were never subject to corrective action by HHS, and HHS waited until September 2015 to put five others on corrective action or enhanced oversight. Two months later, all twelve CO-OPs had failed." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

  • HHS Neglected To Use "Corrective Action" And "Oversight Tools" Made Available To Them. "The Subcommittee's investigation focused on HHS's decision to approve the failed CO-OPs and HHS's management and monitoring of its multibillion-dollar CO-OP loan portfolio. The investigation reveals that HHS approved the failed CO-OPs notwithstanding flaws in their business plans. Once the CO-OPs began losing money at rates far worse than their worst-case projections, HHS barely used the corrective action or enhanced oversight tools available to it. HHS eventually approved additional solvency loans in an attempt to save failing CO-OPs, but again did so despite obvious warning signs. The end result was to exacerbate losses that will now be shouldered by taxpayers, doctors, and others - even as more than 700,000 consumers were forced to find new health insurance plans." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

Considering The Regular Reports HHS Received, The "Failure To Take Action Is Difficult To Understand." "That failure to take action is difficult to understand. Throughout 2014 and 2015, HHS regularly received key financial information from the CO-OPs, including monthly reports on enrollment and financial data sufficient to calculate net income, along with audited quarterly financial statements." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

Despite The Terrible Financial Reports, HHS Continued With Loan Payments, Disbursing $848 Million To Failing Co-Ops In 2014 And 2015. "Third, despite serious financial warning signs, HHS did not withhold any loan disbursements from the now-failed CO-OPs-and in many cases accelerated planned disbursements. Instead, over the course of 2014-2015, HHS disbursed $848 million in taxpayer dollars to the failed CO-OPs, even as those entities lost more than $1.4 billion. For every dollar that HHS sent them over this period, the failed CO-OPs lost about $1.65." ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)

HHS Went So Far As To Provide Provided Additional Loans To 3 Of The 12 Failed Co-Ops. "Fourth, HHS approved additional solvency loans for three of the failed COOPs in danger of being shut down by state regulators, despite obvious warning signs that those CO-OPs will not be able to repay the taxpayer. State regulators require health insurers to maintain a certain amount of capital reserve-called the "risk based capital" requirement. HHS made solvency loans available to the COOPs at risk of failing to meet these requirements, and to date has issued additional solvency loans to six CO-OPs, for a total of $352 million. As with CO-OPs' initial loan applications, Deloitte completed the external assessment for these additional solvency loans. But according to Deloitte, HHS required a truncated analysis of the applications; for example, Deloitte did not even evaluate the 'the likelihood that each CO-OP would achieve sustainable operations based on the revised business plan.'" ("Failure Of The Affordable Care Act Health Insurance CO-Ops," Senate Committee On Homeland Security And Governmental Affairs' Subcommittee On Investigations , 3/10/16)


Previous post

Clinton On Outsourcing: "There Is No Way To Legislate Against Reality"

Next post

Clinton Vs. Clinton On The Families Of Service Members
Republican National Committee

Connect With Us

Republican National Committee
Chairwoman Ronna McDaniel
News & Videos
  • 310 First Street SE, Washington, DC 20003
  • 202-863-8500

By providing your phone number, you are consenting to receive calls and SMS/MMS msgs, including autodialed and automated calls and texts, to that number from the Republican National Committee. Msg&data rates may apply. Terms & conditions/privacy policy apply 80810-info.com.

Paid for by the Republican National Committee. Not Authorized By Any Candidate Or Candidate's Committee. www.gop.com

By providing your phone number, you are consenting to receive calls and SMS/MMS msgs, including autodialed and automated calls and texts, to that number from the Republican National Committee. Msg&data rates may apply. Terms & conditions/privacy policy apply 80810-info.com.

Paid for by the Republican National Committee.
Not Authorized By Any Candidate Or Candidate's Committee. www.gop.com