HHS says up to 40% of health reform’s co-op loans could default

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More than one-third of the nearly $4 billion in loans the federal government plans to issue for the development of non-profit health insurance co-ops could end in default.

“There is that back-end estimate, for conservatism’s sake,” Steve Larsen, director of the U.S. Department of Health and Human Service’s office overseeing implementation of the federal health reform law, told reporters during a conference call this week.

HHS is providing $600 million in loans to help develop the co-ops, which are insurance carriers governed by consumers. The remaining $3.2 billion will be used to backstop these co-ops in the event unexpected claims arise.

The government’s rules for the co-ops were issued July 17, but are subject to the customary public comment period before becoming final.

Under provisions of the Patient Protection and Affordable Care Act, the landmark health reform legislation passed in March 2010, any entity that sold insurance in 2009 is prohibited from becoming a co-op.

Sen. Kent Conrad (D-N.D.) proposed the co-ops while searching for a more palatable model than the public option, government-run programs that would have competed with private insurers, as proposed during the health reform debate last year.

Because co-ops are a new model, HHS forecasts that up to 40% of the planning loans and 35% of the solvency loans could be defaulted on.

Organizations creating co-ops must devote revenue to cutting premiums or improving quality of care. Also, at least two-thirds of each co-op’s business should be serving individuals and/or small businesses, not large groups, according to the proposal.

 

 

 

One Response

  1. Rick Says:

    It just keeps getting better.
    Let’s have some more government !

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