Actual Enrollment and Profitability Was Lower Than Projections Made by the Consumer Operated and Oriented Plans and Might Affect Their Ability to Repay Loans Provided Under the Affordable Care Act

The Patient Protection and Affordable Care Act (ACA) established health insurance exchanges (commonly referred to as "marketplaces") to allow individuals and small businesses to shop for health insurance in all 50 States and the District of Columbia. To expand the number of health insurance plans available in the marketplaces, the ACA established the Consumer Operated and Oriented Plan (CO-OP) program and directed the Secretary of Health and Human Services to provide loans to help establish new consumer-governed, nonprofit health insurance issuers, or CO-OPs, in every State. This report examines whether CO-OP enrollment and profitability met initial program projections. Factors such as low enrollments and net losses could limit the ability of some CO-OPs to repay startup and solvency loans and to remain viable and sustainable.

Most of the 23 CO-OPs we reviewed had not met their initial program enrollment and profitability projections as of December 31, 2014. Each CO-OP submitted a loan application that included details on its annual projected number of enrolled members and projected net income. Specifically, member enrollment for 13 of the 23 CO-OPs that provided health insurance in 2014 was considerably lower than the CO-OPs' initial annual projections, and 21 of the 23 CO-OPs had incurred net losses as of December 31, 2014. Year-end net income data were not available for the Iowa/Nebraska CO-OP as the Iowa Insurance Commissioner took control of the CO-OP in December 2014 because of financial concerns. The Iowa/Nebraska CO-OP was liquidated in March 2015.

Although CMS recently placed four CO-OPs on enhanced oversight or corrective action plans and two CO-OPs on low-enrollment-warning notifications, CMS had not established guidance or criteria to assess whether a CO-OP was viable or sustainable.

We recommended CMS (1) continue to place underperforming CO-OPs on enhanced oversight or corrective action plans, in accordance with Federal requirements; (2) work with State insurance regulators to identify and correct underperforming CO-OPs; (3) provide guidance or establish criteria to determine when a CO-OP is no longer viable or sustainable; and (4) pursue available remedies for recovery of funds from terminated CO-OPs, in accordance with the loan agreements.

In written comments on our draft report, CMS concurred with our recommendations. CMS stated it has taken a number of steps to further oversee CO-OP compliance by requiring external audits, site visits, and additional financial reporting.