Remember Solyndra?

Solyndra was the grand plan of the federal government to demonstrate its business acumen in the solar energy space. To that end, the Obama Administration provided a $535M loan guarantee to Solyndra in 2009. The funds were drawn from a portion of the "Stimulus Package" administered by the U.S. Department of Energy. Solyndra declared bankruptcy in 2011.

At about the same time as the Solyndra failure, many liberal democratic senators were voicing their anger over not achieving a single payer system through the Affordable Care Act (ACA). To compensate for this, they mandated $6 billion of funding to support the "consumer operated and oriented plan program" or Co-op health insurance plans.  These well-meaning senators stated at the time that their intent was to stimulate more competition through a public health insurance option.

To implement these Co-ops, the Centers for Medicare & Medicaid Services established a 15 member Co-op Advisory Board packed with do-gooders and cheerleaders of the ACA, none of whom had particularly relevant experience in such a complex endeavor. The 15 members included four private practice physicians, three academics, three union representatives, two consultants, one leader of an agricultural co-op, one federal government employee, one consumer activist, and a partridge in a pear tree.

To further advance the socially sensitive foundation of the Co-op idea, the ACA mandated that the majority of each Co-op board be members of the Co-op.  By doing so, they were confident that the Co-ops would put patients first and not be beholden to investors or to Wall Street (i.e., capitalism). Their model was designed to assure that the profits they produced would be reinvested in the Co-op to lower premium rates and enhance the benefits of those using the Co-op. Nice idea.

Twenty-three Co-ops were established in as many states at a cost of more than $7,500 per member. Peak membership reached 400,000. Similar to Solyndra, these Co-ops were established with loan guarantees from the federal government using your tax dollars.

So what has become of the Co-ops? The first enrollment period was in the fall of 2013. Since then, 12 of the 23 Co-ops failed and were closed … in a little less than two years. That is about the same amount of time it took for the failure of Solyndra. Co-ops were funded and failed in Arizona, Colorado, Iowa, Kentucky, Michigan, New York, Nevada, Oregon, South Carolina, Tennessee, Utah and West Virginia. According to the HHS Inspector General, all but one of the nine remaining Co-ops are losing money and are expected to close.

To the credit of the federal government, CMS did recognize that there was potential for failure among these Co-ops. They projected that one-third of them would fail during the first 15 years of the Affordable Care Act. The government projections were a little off.

Why did the Co-ops fail? They all suffered from what is called "risk corridor shortfall". And what pray tell is risk corridor shortfall? It means they didn't have enough people enrolled in their plans and the cost of claims for benefits of those who did enroll was too high. So, they lost a lot of tax-funded money on a nice idea that was poorly conceived and executed.

So Solyndra and Co-op health insurance plans are two well documented failures that you can point to the next time the federal government makes the argument that it is best able to plan and develop goods or services to meet societal needs.

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