Health Program Left In Limbo

WASHINGTON — When Congress struck a deal to avert the “fiscal cliff,” it also dealt a quiet blow to President Barack Obama’s health-care overhaul: The new law killed a multibillion-dollar program meant to increase medical insurance competition by funding nonprofit health plans.

The decision to end funding for the Consumer Operated and Oriented Plan (CO-OP) program has left in limbo as many as 40 start-ups vying for federal funding. Many spent upward of $100,000 preparing their applications, and some are considering taking legal action against the Obama administration.

New Mexico Health Connections, a CO-OP organized in Albuquerque, is not affected by the move, said CEO Martin Hickey. The fiscal cliff legislation affects only CO-OPs to which funding has not been obligated, and Health Connections funds were obligated last year, Hickey told the Journal.

For others in limbo like Robert Raasch, who had requested a multimillion-dollar loan to set up a nonprofit health plan in Oklahoma, there is a lot worry. “There may be some legal challenges or some legislative mechanisms we could use. All of that is in discussion.”

The CO-OP program was to spend as much as $6 billion to help launch nonprofit health insurance carriers. It came into favor with Democrats when it became clear that a government-run plan, known as the public option, could not gain enough political support.

In theory, nonprofit health plans could offer lower premiums, which would pressure private insurance companies to cut their rates.

But over the past three years, the program has come under congressional investigation from two committees as Republicans questioned whether the nonprofit plans would make good on their loans, or go belly-up like Solyndra. That company, a solar panel manufacturer, received more than half a billion dollars in federal loans before going bankrupt in 2011.

A bill proposed by House Majority Leader Eric Cantor, R-Va., on Dec. 19, meant to cut $100 billion in federal spending, included a provision that would have eliminated the CO-OP program’s remaining money. That legislation passed the House but died in the Senate.

A more detailed version of this proposal resurfaced in the final fiscal cliff deal negotiated by Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Ky. But it remains unclear why the White House agreed to the provision, and a White House spokesman did not respond to requests for comment.

Even some Affordable Care Act supporters had doubts about whether the start-ups could succeed. They would have needed to repay their federal loans within five years.

“This program didn’t do a lot to get these guys the resources they needed,” said Sabrina Corlette, an assistant professor at Georgetown University. “These aren’t grants, they’re loans, and there was a really fast time frame for loans to be repaid. You’d have to cobble a lot together incredibly quickly.”

The Department of Health and Human Services already had sent nearly $2 billion to 24 CO-OPs. Those plans are scheduled to begin accepting their first customers in October, when the new health exchanges are ready for open enrollment.

The CO-OP program’s funding was cut from $6 billion to $3.4 billion in a previous budget agreement. The fiscal cliff deal cuts nearly all of the program’s unobligated money, approximately $1 billion, leaving only a small portion to administer the CO-OP loans already granted.

The Congressional Budget Office estimates that the change will generate $200 million in savings by 2017.

Oklahoma’s Raasch, a lawyer by trade, is looking at whether the states stuck in limbo could file a lawsuit to restore the money.

Journal staff contributed to this report.

— This article appeared on page B1 of the Albuquerque Journal