The failure of health insurance “co-ops” around the country has become one of the saddest stories of Obamacare—and for a long time, it wasn’t getting the attention it deserved. But we’re finally seeing signs that the business press, at least, is digging in.
Last November, Adam Cancryn of SNL Financial offered a stellar look at why the co-op experiment has faltered nationally. Now, the veteran reporter Michael Waldholz has done same thing with a focus on New York State. “The short and chaotic life of an Obamacare darling,” a critical look at the failure of Health Republic that appeared last week in Crain’s New York Business, sums up the sorry tale of a good idea gone terribly wrong.
The 23 “co-ops,” or “consumer operated and oriented plans,” were created under the law as an alternative to the doomed public option, and were intended to bring choice and competition to the new insurance exchanges. While some struggled to sign up customers, others succeeded all too well: New York’s Health Republic had more than 200,000 enrollees when it was ordered to close last fall. But more than half have now been shuttered.
In New York and elsewhere, the warning signs were visible almost from the beginning, and the decline of many of the co-ops has been noted in the media. What Waldholz’s story adds is a clear narrative and a new level of detail showing just how overwhelmed Health Republic was. His article opens with the co-op’s medical director charging $30,000 in prescriptions to his personal credit card. And here’s how he sums up Health Republic’s troubles:
Management deliberately set low premium rates as a marketing ploy to attract customers. Regulators approved those rates but then wouldn’t let the company raise them after it became clear that the prices jeopardized the company’s solvency. Revolving top management, poor decisions made by inexperienced executives and inadequate services from outside vendors served to sink the company. As well, a Republican-controlled Congress slashed federal funds created to guarantee that Obamacare insurers could survive their first years.
“It was a failure with many people to blame,” Waldholz, a longtime reporter for The Wall Street Journal and Bloomberg, told me in an interview. In his piece he reported that one ex-staffer told him the carrier “was essentially blind” to how high the costs were, and that data in 2014 financial reports to the state contained “especially optimistic” costs estimates. State officials are now investigating those reports. The federal government’s decision to pull millions of dollars that were initially promised, coming on top of the internal errors, was the final straw.
Waldholz managed to crack open the story even though Health Republic’s top management wouldn’t talk, and it took him two months to get a phone interview with Troy Oechsner, the deputy superintendent for health at the Department of Financial Services. He used social media to identify several dozen people who had worked for Health Republic, and some agreed to talk on background. He followed up by reading financial reports and attending a public hearing in Albany where state senators explored the state’s system of rate regulation, which is at the center of how and why the state approved Health Republic’s low rates and then kept them low even as cash was short. The room was overflowing. It was hard to get a seat, Waldholz recalled, “but everyone was there. It was great for me not knowing the beat.” He got more names to contact.
Time and money also helped. His three-month project was supported by a $15,000 grant from the CUNY Graduate School of Journalism, which makes money available for investigative reporting projects about the New York City metro area.
Could there be follow-ups? Waldholz says he has FOIA requests pending at the state Department of Financial Services and the federal Centers for Medicare & Medicaid Services for memos and documents that might help answer on outstanding question: What role did the state’s executive branch play in propping up Health Republic? “Did the politicians want to say they kept the rates low without looking at the consequences?… I want to keep following that in New York,” he says.
Let’s hope he has company. The co-op experiment may have been a sad tale, but the effort to understand how they went wrong shouldn’t be over.