CoOportunity failure could cost feds $140 million

The federal government could be out more than $140 million by the time a defunct Iowa health-insurance cooperative's finances are settled, a new court filing suggests.

CoOportunity Health, which was created under the Affordable Care Act, went belly up last December after losing millions of dollars. Its financing included $147 million in loans from the federal government. That money was used to launch the company in 2012 and then to keep it afloat as it sold health-insurance policies to about 110,000 people in Iowa and Nebraska.

A lawyer overseeing the unwinding of the company filed a "status report" in Polk County District Court Friday. The report estimates the company currently has more than $282 million in liabilities and less than $109 million in assets.

The lawyer, Dan Watkins, said Monday that the outcome of the case depends heavily on how much money CoOportunity gains from a program that was supposed to help insurers recoup extra costs for taking on customers with extensive health-care needs. The "risk-corridor" program was supposed to collect money from insurers with relatively low-risk customers and transfer it to insurers with high-risk customers. CoOportunity is owed about $124 million out of that fund, said Watkins, a Kansas specialist hired by the Iowa insurance commissioner. But, he said, that money isn't being counted as an asset yet, because it isn't clear how much of it will actually be paid out.

Watkins noted that Congress voted to prevent any use of public money in the risk-corridor program. It must be financed solely by fees paid by insurers, and there apparently aren't enough of those to pay the whole tab, he said. Watkins said Iowa officials should learn in about a month how much will be coming from the program to help pay CoOportunity's debts. He's seen estimates that only about 10 percent of the money expected nationally will be paid out this year.

CoOportunity was one of 23 health insurance co-ops set up under the Affordable Care Act, also known as Obamacare. It was the first to fail. Louisiana's version announced last month that it would go out of business after this year. A report by federal investigators last month found that most of the other co-ops also have lost money.

The federal government is not first in line to receive money from CoOportunity's liquidation, which is similar to a bankruptcy. At the front of the line are the people and firms who are settling the situation, including state-mandated "guaranty associations," which have covered medical bills for CoOportunity's former members. The administrative charges will reach several million dollars. After that expense will come reimbursement of the guaranty associations for $109 million in payments they made to doctors and hospitals. These payments were financed by the insurance industry in Iowa and Nebraska.

Watkins said he believes that CoOportunity will bring in about $97 million this year, even without the "risk-corridor" money. The money in hand would mostly pay back the guaranty associations, he said. It wouldn't begin to pay back the federal loans.

The company's debts also include $3.6 million in commissions owed to insurance agents who sold CoOportunity policies. Watkins said it's not clear yet what place the agents would stand in the line of creditors. The good news, he said, is that doctors, clinics, hospitals and other health-care providers have been paid for their care of former CoOportunity members. The situation's main financial cost to the members was that some of them had to start paying down 2015 deductibles for their CoOportunity policies in January, then start over on new deductibles for replacement policies from other carriers when they switched in February or later.