Program Designed To Help With New LA Health Cooperatives Fails

BATON ROUGE (AP) — A federal program designed to aid federally created health plans such as the Louisiana Health Cooperative Inc. instead became the final nail in the ailing nonprofit's coffin.

         The Advocate’s Ted Griggs reports Louisiana Health — taken over by state regulators on Sept. 1 — was one of 23 plans created nationally under the Affordable Care Act to ensure there would be competition among health insurers. Altogether the co-ops received more than $2.4 billion in low-interest federal loans to get started. Only two have proven to be profitable amid restrictions that experts say have hampered the co-ops' development.

         The Louisiana plan landed more than $66 million to get it started.

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         But the Affordable Care Act also included programs designed to stabilize the health insurance market. One of them, risk adjustment, takes money from insurers with a healthier mix of customers and spreads it among companies who take on sicker policyholders. The idea was to get insurers to compete on the value and efficiency of their plans rather than targeting the healthiest, least risky and more lucrative customers.

         The co-op thought it would receive $2.8 million under the risk adjustment program, but health insurers didn't know exactly how the provision would affect them until June 30. That's when the U.S. Department of Health and Human Services issued a report that contained an unpleasant surprise for the Louisiana co-op: Instead of getting $2.8 million, the co-op would have to pay $7.5 million to the federal government.

         "So there was a $10 million swing . The company expected a revenue bump, and instead, they got a revenue hit," said Billy Bostick, the court-appointed receiver overseeing the cooperative's operations. "That was a big part of it. There were other things."

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         The co-op was already bleeding cash.

         Louisiana Health had lost more than $28 million by the end of 2014, its first year of providing coverage, according to records filed with the state Department of Insurance. The risk-adjustment payment was a death blow.

         For more information

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