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ACA CO-OP Program

The state officials in Illinois have shut down three CO-OP facilities within the last two month, the most recent one being the Land of Lincoln health insurance company. The Affordable Care Act (ACA) introduced 23 CO-OP facilities around the country, 16 of which have been closed by state officials already, and reports suggest that the remaining seven facilities may also face the same fate soon.

ACA introduced the Consumer Operated and Oriented Plan (CO-OP) program with an objective to bring the qualified nonprofit health insurance providers to individual and small markets, hoping that the initiative would increase competition and widen the choices. The Federal government spent around $2.4 billion on the CO-OP program since its introduction in 2014, out of which, almost 1.7 billion was spent on the CO-OPs that have been closed by state authorities.

The CO-OP program showed great promise during the initial stages, and approximately one million American citizens were enrolled in the program until last year. However, the closure of CO-OP programs has reduced the number of enrollers to 350,000. Moreover, the closing down of CO-OP programs now has forced thousands of individuals to look for new coverage for the rest of the year.

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Affordable Care Act

Analysts claim that the risk-corridor program of ACA is one of the main reasons for the failure of CO-OP program. Most of the CO-OPs entered into ACA market by using the funds they received as grants from the Federal government. Even though many of the CO-OPs were successful in establishing safe and secure enrollment, they ran on negative margins often. In majority of the cases, expenses were calculated to be higher than the average amount, and the revenues were way below the average value.

The risk-corridor program established by the ACA was supposed to cover the losses suffered by the CO-OP program, as it was an actual backup to the CO-OP program meant to fix and stabilize the ACA marketplace. Unfortunately, the risk-corridor program failed to deliver adequate funds after it become budget neutral, eventually failing to cover the losses suffered in ACA marketplace. The amount received from “higher than average” profits from health plans were substantially less than the amount required to cover the “higher than average” losses.

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