What has seemed likely since Christmas Eve was confirmed on Friday: Iowa’s non-profit health insurance coop is liquidating. At the end of this post, I’ve enclosed the e-mail CoOportunity Health members received on January 23. Members are strongly encouraged to enroll in other health insurance before February 15, the end of 2015 Open Enrollment under the federal health care reform law. In Iowa, only Coventry now sells policies through the exchange, allowing eligible people to receive federal tax subsidies to help cover the cost of insurance.

CoOportunity Health was created to sell individual, family, and small-business health insurance policies in Iowa and Nebraska. Its membership greatly exceeded projections, but so did the costs of insuring a population that had largely been uninsured before the 2010 Affordable Care Act went into effect in 2014.

Some politicians, like Senator Joni Ernst, have nothing to say about CoOportunity’s collapse beyond empty talking points about Obamacare. Others, like Senator Chuck Grassley and Representative Dave Loebsack (IA-02), are digging for answers on why federal officials didn’t do more to help the health insurance coop survive. Those are important questions.

As far as I can tell, no one in a position of power is examining how decisions by Iowa officials stacked the deck against CoOportunity ever becoming solvent. Did Iowa’s insurance commissioner Nick Gerhart seal the coop’s fate by bending over backwards to suit the 800-pound gorilla in Iowa’s health insurance market (Wellmark Blue Cross/Blue Shield)? Now that CoOportunity’s failure leaves only one company selling policies on Iowa’s health insurance exchange, what is Gerhart’s “plan B” if Coventry decides later this year against continuing to participate on the exchange for 2016?

On its surface, CoOportunity’s failure is a simple matter: as Iowa Insurance Commissioner Gerhart told the Des Moines Register last month, “They ran into a liquidity crisis, and their lender shut the window on them.” Trudy Lieberman explained more in a January 19 piece for the Columbia Journalism Review. In September 2014, CoOportunity “received a $32.7 million [federal] ‘solvency loan,’ on top of the roughly $113 million in start-up capital it had received under the ACA [Affordable Care Act].” Its request later last year was denied by the Centers for Medicare and Medicaid Services because of limited funding. Lieberman points out,

In early 2013, as part of the deal to resolve the “fiscal cliff,” Congress rescinded 90 percent of uncommitted loan funds that were available to support the co-ops. This was after an earlier cut had already sharply pared back the level of funding originally authorized in the ACA. CJR reported at the time how the 2013 law stopped the development of additional co-ops that were awaiting approval. It may have now contributed to CoOportunity’s failure too.

There was still another source of federal funding-money CMS had for program administration. Some of it could have been transferred to CoOportunity, according to Martin Hickey, president of National Alliance of State Health Co-Ops, a trade association. But a more recent act of Congress-the “cromnibus” spending bill passed in December-cut those funds. And, said Hickey, “they explicitly prohibited CMS from using any of that money for any activity under the Affordable Care Act.” The double blow, with no expectation of sufficient federal funds to arrive anytime soon, prompted Iowa regulators to take over the company.

Indeed, Lieberman warned in this January 2013 piece for Columbia Journalism Review that when Congress cut the funding to support the health insurance coops, they were setting them up to fail as a “gift” to larger insurance companies.

Senator Grassley’s questions about CoOportunity have centered on why federal officials pulled the plug on Grandma sorry, pulled the plug on funding for the coop. Here is the senator’s official statement, released on January 23:

Sen. Chuck Grassley of Iowa today made the following comment on the state of Iowa’s decision to seek liquidation of the health insurance co-op CoOportunity, which has run out of money.  Grassley is looking into the federal government’s management of CoOportunity and other health care co-ops like it around the country.

“The state insurance commissioner is working with the other major insurer, Coventry, to make sure Iowans maintain coverage.  I’m working to find out what happened between CoOportunity and the federal government.  The taxpayers have $2 billion invested in co-ops around the country.  The taxpayers only get their investment back when the co-ops succeed.  I’m concerned about the federal government’s management of the co-op program.  It’s unclear whether the federal government was responsive to CoOportunity when the co-op sounded the alarm on running out of money.  If the federal government couldn’t be reached, or failed to respond adequately, that’s poor management.  I look forward to getting answers.”

Grassley’s letters on CoOportunity are available here, here and here.

Again, I give Grassley credit for doing something. In contrast to Ernst, Grassley is asking some of the right questions. From his January 16 letter to CoOportunity’s CEO Cliff Gold:

As early as last summer, both CoOportunity and IID [Iowa Insurance Division] reported its financial situation to CMS, and in July CoOportunity requested additional loans to fund the co- op. In December 2014, CMS denied CoOportunity’s request. In response, IID submitted an Order of Rehabilitation to take over operations of CoOportunity. It now appears likely that the co-op will be liquidated and those who signed up for insurance under CoOportunity will need to seek alternate coverage.

On January 13, 2015, I wrote to CMS about its management of the co-op loans and whether it was transparent with CoOportunity and other organizations about the amount of funding available. I am also concerned that even though CoOportunity’s funding shortages were well known for at least six months, CMS apparently did not tell the co-op or IID that it would not receive additional funding. While CoOportunity was facing financial challenges, if CMS had informed it earlier that it would not receive additional funds it could have taken steps to potentially avoid failure.

CoOportunity’s failure negatively impacts thousands of people in Iowa, as well as Nebraska. It also raises troubling questions about CMS’s transparency with the co-ops and its distribution of funds.

Representative Dave Loebsack also wants an investigation into how federal officials handled CoOportunity’s troubles.

Someone–perhaps the Iowa House or Senate Government Oversight Committee–should look into other questions, such as:

1. How was CoOportunity affected by Gerhart’s decision to allow Wellmark Blue Cross/Blue Shield to avoid selling policies on Iowa’s health insurance exchange? Some state insurance commissioners have required participation from all companies that control a certain portion of that state’s market. Wellmark controls approximately three-quarters of the Iowa market for individual and family policies, yet they are not required to sell on the exchange.

Since the state health insurance exchanges largely serve people who were previously uninsured, or in some cases uninsurable, Gerhart’s decision kept a relatively expensive to cover population away from Wellmark.

2. How was CoOportunity affected by Gerhart’s decision to allow Wellmark Blue Cross/Blue Shield to keep selling policies that are not compliant with the Affordable Care Act through 2016? Dr. David Carlyle, who was an advisor to CoOportunity, alluded to that problem when speaking to the Des Moines Register’s Tony Leys last week:

Carlyle said Iowa needs more competition in its health insurance market. But he doubts any new players will want to enter that market now after seeing what happened to CoOportunity. He said that’s especially true as long as Wellmark is allowed to let long-standing customers keep old policies that don’t meet Affordable Care Act standards.

The Obama administration and state officials are letting customers keep such plans through 2016. Critics of that move say it lets Wellmark hang onto a huge block of relatively healthy customers, who were able to pass screenings for chronic health problems. Carriers are no longer allowed to reject customers with pre-existing health problems.

Critics of the extensions say this means insurers just entering the market must take on people with chronic illness without having much chance at attracting Wellmark’s relatively healthy, long-standing customers.

3. How was CoOportunity affected by Governor Terry Branstad’s refusal to simply expand Medicaid as foreseen under the health care reform law? By insisting on a system that shifted some lower-income Iowans into private health insurance policies, Branstad indirectly led to CoOportunity taking on an expensive population. Approximately 9,700 Iowans signed up with CoOportunity through the Iowa Health and Wellness Plan. That’s a small share of the coop’s total membership, but according to Dr. Carlyle,

many of the 9,700 Iowans it covered under that program had serious chronic health problems, such as hepatitis or AIDS.

Federal officials wouldn’t let CoOportunity charge enough in premiums to cover those people’s costs, and the carrier wound up losing piles of money before dropping out in October, Carlyle said. Unlike Coventry, CoOportunity didn’t have large financial reserves to cushion the blow, he said.

If Iowa House Republicans and the governor had agreed to expand Medicaid, there would have been substantially less financial pressure on CoOportunity last year.

My family purchased a policy through CoOportunity and only recently switched to Coventry after news broke about the health insurance coop’s problems. Between now and mid-February, thousands more former members of the coop will sign up with Coventry in Iowa. What will happen to all of us if Coventry decides later this year that it’s too expensive to keep participating on Iowa’s health insurance exchange?

Many people will not be able to afford a Wellmark policy without the tax subsidies available to people who buy through the exchange. Unless Gerhart’s office requires participation from Wellmark, Coventry’s departure would leave zero options on the Iowa exchange.

Any relevant comments are welcome in this thread.

E-mail sent to CoOportunity members on January 23:

Urgent: CoOportunity Health is Going Out-of-Business; Enroll Now in Other Health Insurance Coverage

Please carefully read this information about the future of CoOportunity Health and your health insurance coverage.

The Iowa Insurance Commissioner has determined that efforts to rehabilitate CoOportunity Health have been unsuccessful and he plans to ask the court to place the company into liquidation. This means the company is going out-of-business, and your health insurance coverage will be affected.

Open Enrollment Continues Through Sunday, February 15

The Iowa Insurance Division and Nebraska Department of Insurance strongly encourage you to enroll in another health plan with a different company by Sunday, February 15.

It is important to remember your annual deductible and out-of-pocket maximum in 2015 may not carry over to a new carrier. The sooner you move your coverage to another insurer, the less out-of-pocket costs you will incur under your CoOportunity Health coverage.

Changes When Liquidation Occurs

When CoOportunity Health moves into liquidation status, likely on February 28, the following changes will occur:

$500,000 Claims Limit: Although eligible pharmacy and medical claims for covered services will continue to be paid in liquidation, there is a $500,000 per member limit on medical and pharmacy claims. This is because the claims will be paid by the Iowa and Nebraska guaranty associations. Any medical and pharmacy claims that exceed the $500,000 limit may be submitted to CoOportunity Health, but there may not be sufficient assets to pay all amounts over $500,000, so individuals could be billed for those amounts.

If you do not replace your CoOportunity Health coverage, under applicable law, the Iowa and Nebraska guaranty associations will terminate your coverage no later than year end.

How to Shop for a Different Health Insurance Plan

If a broker or agent helped you enroll in health insurance, please contact him or her immediately to discuss enrolling in other coverage.

If you enrolled on your own, go to the Internet and type in “health insurance Iowa” or “health insurance Nebraska” in your search engine to find other coverage options.

Websites for Up-to-Date Communications

For updates and answers to questions about CoOportunity Health, visit the CoOportunity Health, Iowa Insurance Division or Nebraska Department of Insurance websites.

Read the updated Q & A and the January 23 announcement from the Iowa Insurance Commissioner.

February 15: Important Date to Keep in Mind

Sunday, February 15, 2015: Last date to enroll in a different health insurance plan during 2015 Open Enrollment. If you enroll by February 15, your new coverage will start on March 1.