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| The Train Wreck Continues |
"Tennessee's insurance commissioner released a statement saying that its health insurance startup, also called a co-op, will no longer offer health plans in 2016 due to the growing financial burden. 'With thousands of Tennesseans' coverage hanging in the balance, [the co-op's] financial success could not be guaranteed,' commissioner Julie Mix McPeak wrote in a statement Wednesday afternoon.
"The decision comes less than a week after the collapse of Kentucky's co-op. The two programs are among 23 that received seed money from the federal government to help create alternatives to traditional insurers — money that is looking less likely to ever be repaid. Like Kentucky's, Tennessee's closure was also abrupt. The program had planned to offer coverage in 2016 and had already gotten approval for its new rates. But McPeak said the state changed course this week after learning that it will get less help than expected from the federal government through its 'risk corridor' program."
The Memphis Commercial Appeal adds, "A nonprofit Tennessee health insurer founded with $73 million in loans provided by the Affordable Care Act won't offer insurance next year.
"Community Health Alliance, which began providing health coverage in 2014, is voluntarily winding down and won't offer coverage in 2016, the Tennessee Department of Commerce and Insurance announced Wednesday.
"The Knoxville-based insurer is among co-ops serving at least five other states that are also winding down service.
"Community Health, which has enrolled about 27,000 people statewide, until Dec. 31 will continue serving its existing customers who pay their premiums, officials said. Those customers, including an undisclosed number in Memphis, will have to choose other insurance companies for coverage during the 2016 open enrollment period that begins Nov. 1 for the HealthCare.gov insurance marketplace. . . .
"A July report by the U.S. Department of Health and Human Services Office of the Inspector General cited the financial concerns about Tennessee's co-op as an example of how lower than expected enrollments and net losses were taking a toll on the 23 started by health reform's Consumer Operated and Oriented Plans program.
"The Tennessee co-op lost $22 million in 2014 and was projecting a loss of about $3.7 million for 2015, according to the report.
"Iowa's regulator ordered a co-op serving Iowa and Nebraska to shut down earlier this year. By the end of the year, co-ops in Louisiana, Nevada and New York will close shop."
The federal government awarded a total of $2.4 billion in loans for the start-ups to encourage competition for health coverage."
As The Wall Street Journal editors explained, "These [co-op] plans were seeded with billions of dollars in federal start-up loans and were supposed to work like the credit unions or the electric collectives of the Depression era. No profits were allowed, advertising to introduce new products was restricted and industry executives were barred from management. As it turns out, attempting to outlaw expertise and incentives tends not to produce good results.
"The implicit Fannie Med-type taxpayer backstop let the co-ops gamble on undercutting their competitors to steal market share, pricing premiums well below cost. They figured that any mistakes could be papered over with a bailout from Uncle Sugar. . . .
However, they pointed out, "The federal rescue helicopters never arrived because Republicans in Congress defeated the White House in budget negotiations and thus reduced spending on the co-op program to $2.4 billion from $10 billion. The bailout dollars simply weren't there."
Following the announcement that the Kentucky co-op would be shuttered, Kentucky's senior U.S. Senator Mitch McConnell responded, "Barely a week goes by that we don't see another harmful consequence of this poorly conceived, badly executed law. Despite repeated Obama administration bailout attempts, this is the latest in a string of broken promises with real consequences for the people of Kentucky who may now be losing the health insurance they had and liked twice within the past three years because of Obamacare's failures."
Sen. McConnell was correct and now we have learned of Tennessee following suit, When will the Obamacare Train Wreck stop?
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