Obamacare’s Co-Ops: A Bigger Scandal Than Solyndra? – by Scott Gottlieb

This butchery didn’t come about without a lot of government assistance along the way. Collectively, the taxpayers have loaned the co-ops more than $2.4 billion spread over just 23 health plans. Now, Uncle Sam stands to lose a good chunk of that money as the plans start filing for bankruptcy. In Iowa, the bankruptcy of just one co-op will likely cost taxpayers all of the $180 million they flushed into the insurer.

The New York Times blamed the failure of that Iowa plan, which went by the name CoOportunity, on the co-op’s success. The newspaper’s healthcare reporter reasoned that the plan proved so popular with consumers, it exhausted its budget.

Another way to look at it is that the co-op robbed its customers. They knowingly underpriced their product, took in more revenue than they could service, and then hid behind bankruptcy proceedings when they couldn’t meet the obvious demand. In business vernacular, this is a variation of the age-old Ponzi scheme. In the New York Times, it’s sadly portrayed as an inspiration – the co-op a victim of its own munificence.

Progressive architects hailed co-ops when the plans unveiled amazingly low rates last year. It seems that was the last political gasp of a dying dogma. Measuring the risk of a population of beneficiaries, and pricing an insurance product, turns out to be a hard business after all. The profit motive is a reasonable way to ensure that beneficiaries actually get the services they’re promised.

via Obamacare’s Co-Ops: A Bigger Scandal Than Solyndra?.