As we gear up for Open Enrollment 2015 – ObamaCare’s largest CO-OP fails.

ObamaCare created “CO-OP” heath plans, and provided startup loans. But would they survive? Would the theory that not-for-profit health plans could not only compete, but would be “better” than commercial insurance companies, pan out?

It is starting to look like the answer is a resounding “NO.” Co-ops in Louisiana, Vermont, Nevada, Nebraska and Iowa failed earlier in the year. Now the largest CO-OP in the country, Health Republic in New York, has failed. Covering 210,000 members, they lost $130 million in their first 18 months. The New York State Insurance Dept is closing them down in an organized fashion.

The Daily Signal reported, “Robert Moffit, a senior fellow at the Center for Health Policy Studies at The Heritage Foundation, said Health Republic’s failure is not surprising given a recent report from the Department of Health and Human Services’ inspector general that found 22 of the 23 co-ops experienced financial losses in 2014.

“It’s just the latest costly example of a political attempt to manipulate the health care markets,” Moffit said. “Co-ops should be able to emerge naturally in a free market.””

Another blog reported, on the startup money, “The $356 million for Health Republic went to Sarah Horowitz, a liberal New York political activist who previously launched the Freelancers Insurance Company that state officials have ranked as providing the poorest consumer service among Empire State health insurers.”  In fact, the Obama Administration has given $2.5 Billion dollars to 25 CO-OPS, after being warned by its own experts that most of the CO-OPS would never repay the laons and would fail.  24 are losing money.  By contrast, remember all the noise about the Solyndra Scandal? That only cost $500 million – one fifth the cost of the CO-OPs!

Word on the street is a combination of factors merged to be a recipe for disaster. An administrative team with a questionable success rate, taking on markets that no other company wanted (for a reason?), and underpricing the market all contributed.  Federal requirements that the CO-OPS be run by people with no ties to the insurance industry (as if proper risk management and pricing policies doesn’t require any skills.)

Estimates are that another 10 could fail in the next year, most notably Kentucky- which has the largest enrollment in the country after New York. They have already received additional emergency funding.

In South Carolina, Consumers Choice Health Plan enrolled more than double the number they expected. Their CEO sent a letter this week, apologizing for falling short of their customer service expectations, most likely a result of not being prepared for the tremendous enrollment they achieved. In 2014 they lost $3.8 million. Sadly, this is one of the best performances in the country. Only the Maine CO-OP was profitable. By comparison, the Kentucky CO-OP lost more than $50 million last year.

The great experiment that is ObamaCare, and most specifically CO-OPS, seems to have been designed for failure, and we still have yet to answer the big question: How does the country pay for the estimated $1 trillion in subsidies being paid out over the next 10 years?