Another ObamaCare provision is falling on its face, but this is one that hardly anyone even knew existed.
Part of the law called for the creation of “Consumer Operated and Oriented Plans” (CO-OPs). The law originally appropriated $6 billion to set up these plans in all 50 states. It created an entirely new section of the Internal Revenue Code (Sect 501-C-29) to allow this new type of member-operated organization to be tax-exempt. They were intended to be sort of like the “public option” the Democrats wanted to compete with private insurance plans.
It was a pretty dumb idea in the first place, made even worse by the way the legislation was written. The Urban Institute published an “interim assessment” of the program back in August that ticked off all the problems it is having. One example is this:
The law also prohibits using the loan funding for marketing or “propaganda.”
So the law’s authors equate marketing with “propaganda.” And they expect these plans to succeed without doing any marketing.
The law also prohibits any “insurance industry involvement and interference,” and it also prohibits HHS from being involved in provider negotiations or pricing of services. And the plans are prohibited from being sponsored by any state or local government or from having any representative of government on their boards. So where is any expertise going to come from? The law’s authors seem to think starting an insurance company from scratch is as easy as organizing an Occupy Wall Street demonstration.
The law requires that “substantially all” of a plan’s activities be in the individual and small group markets, so that precludes farm bureaus, labor organizations, or other existing organization who might be sympathetic to the goals of the plan.
HHS has issued a “funding opportunity announcement” (FOA) that specifies that applications for funding must include, according to the Urban Institute paper:
a feasibility study, a detailed business plan, a detailed budget with narrative and a timeline for meeting various milestones, including the necessary state regulatory approvals.
It goes on to explain:
A feasibility study must be supported by an actuarial analysis and is concerned with the likelihood of success. It must describe “the target market, products to be offered, regulatory schemes, market impact, financial solvency, economic viability, State solvency requirements and other regulations and other key factors.” It should also include “pro forma financial statements with sensitivity testing for alternative enrollment scenarios.” The business plan should describe the management team, target market, competing plans, targeted potential subscribers, the process used for pricing products, contracting strategy, proposed methods for provider payment, and plans for use of integrated care models. Budgetary matters, strategies for obtaining enrollment and plans for becoming operational (financial management system, information technology, staffing plans) must also be included.
All of this, just to apply for funding. Wow!
Congress reduced the program’s funding from $6 billion to $3.8 billion in the April, 2011 budget agreement. So we will be “saving” $2.2 billion, and only wasting $3.8 billion on a program that can never work. But that $3.8 billion will end up in somebody’s pocket, so I suppose it qualifies as “stimulus.”