It is with sadness that I acknowledge the takeover of the cooperative health-insurance company, CoOportunity Health, by the Iowa insurance commissioner. I have touted CoOportunity Health many times in this blog, and I have strongly felt it was a critical part of the current health-reform efforts in Iowa. My sadness is even greater for the 100,000 individuals who had insurance with CoOportunity Health. These individuals’ confidence and coverage are jeopardized because of this action. The health and peace of mind of friends, family, and patients who I know are insured by CoOportunity Health are a major concern for me at this time.

Tony Leys, a fine reporter for the Des Moines Register and for whom I have great respect, wrote a front-page story that ran this Christmas Day about the announcement and of the lack of adequate funds for CoOportunity Health to proceed with its current business. With my background knowledge — I was present at the advent of the company — and my continued observations of its efforts in multiple ways, I would like to share my thoughts regarding the action, which should be considered a supplement to Tony Leys’ Christmas Day article.

In its current form, CoOportunity Health failed for several reasons, many of which could be covered in an undergraduate course of Health Insurance 101. As a member of the federal advisory committee for the co-op program, I learned from the start of my tenure that these fledgling cooperative-insurance companies would be subject to unusual risks by insuring individuals who previously may not have been insured and who have great unmet health needs. To provide protection for this contingency, by statute, the program had three separate backup funding mechanisms, called the 3 Rs. The 3 Rs are too complex to discuss here and, knowing it would require an individual trained and experienced in health-care insurance to explain fully, I will assure you that these mechanisms existed to protect new co-ops like CoOportunity Health.

The first and foremost reason for CoOportunity Health’s failure, from I what I have ascertained, was the federal government’s handling of these 3 Rs. Some background information is necessary here. CoOportunity Health, which operates in Iowa and Nebraska, sold health-insurance policies on the healthcare.gov Exchange to individuals, as well as off the Exchange to individuals and to businesses large and small. In Iowa, it also participated in the Marketplace Choice Plan, a part of Iowa’s version of Medicaid expansion called the Iowa Health and Wellness Plan, by insuring individuals with incomes between 100 and 133 percent of the federal poverty limit (FPL). CoOportunity Health’s first-year enrollment projections were between 11,000 and 15,000 covered individuals. Based on these projections, it received close to $90 million as a federal loan to create its insurance reserve. It also received another federal loan for $20 million for startup costs.

On January 1, 2014, CoOportunity Health had no income and no policyholders.This month, December 2014, I was told that it had enrolled 98,000 policyholders. Tony Leys says in his article that it had about 120,000 policyholders. I was told the annual premiums from these policies would amount to more than $350 million. I was also told that, in the first two months of operation, January and February 2014, CoOportunity Health had 24 requests for major organ transplants. An additional bit of information: It’s infrastructure for operations was rented from Health Partners of Minneapolis, which is the nation’s largest health-insurance cooperative and is competitive in one of the most cost-efficient markets in the country. It follows then, in a situation of having up to a tenfold increase above enrollment projection in a population with obvious unmet health needs, undergraduate students in Insurance 101 would not be surprised that CoOportunity Health would need the 3 Rs, which was precisely why the legislation called for their existence. But, from what I have been told, even though some of the 3 Rs money is in the bank now, the federal government would not allow any of this estimated $120 million to $140 million that CoOportunity is owed to be disbursed until summer of 2015 or even later in the year. Equally important, the federal government would not allow CoOportunity Health to use this guaranteed money as collateral for a loan from private sources. The failure of the 3 Rs to work, I believe, doomed CoOportunity Health. Sometime this coming summer, the federal government will distribute this money. The question: to whom? Another important question: Why did the federal government not distribute the money earlier or at least allow it to be used as collateral for a bridge loan?

Cause of Failure Number 2: Loss of healthy, insured individuals to share the insurance risk. I blame President Obama and the Branstad administration for this cause. When President Obama told Americans that they could keep their current insurance if they liked it, it created a scenario in the individual health-insurance market where healthy individuals who already had reasonable-cost plans, often with lesser benefits (benefits that did not meet the minimum essential coverage (MEC) standards required by the Affordable Care Act) kept their current insurance, leaving CoOportunity Health to carry adverse risk with either unhealthy individuals with inadequate insurance (such as policies that did not cover pre-existing conditions), and noninsured individuals with unmet health-care needs. Health Insurance 101 would teach us that this situation put CoOportunity Health at great risk. Many state insurance commissioners recognized and acknowledged this tenet of health-insurance theory and did not allow such noncompliant plans, with the potential to cherry pick healthy policyholders, to exist. Iowa chose to allow individuals to keep their current, if inadequate, health-care plans. Now, the aftermath is the Iowa insurance commissioner taking over CoOportunity Health and, as Tony Leys quotes in his Christmas Day article, “The Iowa insurance commissioner is now the ‘CEO’ of CoOportunity Health.”

Cause of Failure Number 3: The unwillingness of the federal government to allow CoOportunity Health to price premiums for Marketplace Choice Plans (Iowa Medicaid expansion) for individuals at a price that was appropriate by established actuarial standards. Instead, the federal government required this line of business to be priced at the average price of all CoOportunity Health’s lines of business.

Given the obvious and expected burden of health-care needs that this group of individuals had, it is no wonder that CoOportunity lost an excessive amount of money on this line of business. I lobbied for a Medicaid expansion, modeled along the lines of the Healthy and Well Kids in Iowa (HAWK-I) program, which used private insurance to provide children with health insurance coverage. I am sure that in the years Wellmark supplied insurance for HAWK-I, Wellmark did not price its premiums to the Iowa state government at less than what its actuaries recommended.

Cause of Failure Number 4: The fact that $2 billion of the original $6 billion co-op federal funding was removed last year in a budget deal between Congress and the president in an attempt ostensibly to save money for the deficit. Unfortunately, it was determined later that since these monies were always to be loans, any positive effect on the deficit was far less than originally reported. The additional $2 billion may have been available for CoOportunity Health this year when it was critically needed but for the actions of the president and Congress.

My Final Cause for Failure: The lack of an effective state Exchange, which I have lamented in many blog entries. The consequences of no Iowa Exchange include Iowa having the second-worst enrollment in the nation and led to many healthy Iowans not enrolling for federally subsidized health insurance. The lack of a healthy, insured population once again led to a skewed population of sicker individuals for CoOportunity Health to insure. The Branstad administration could have and should have created a state-based Exchange last year or this year. It had federal funds available to do so. Individuals who did not sign up for health insurance on the Exchange and consequently do not have health-care coverage, as well as CoOportunity Health, are the worse because of the lack of an effective Iowa Exchange.

I know many in the leadership of CoOportunity Health and thank them for their vision, effort, and dedication, but I would be remiss in my duty to the readers of this blog if I did not openly state that I have some questions. 1) Should there have been written assurances from the federal government to back the additional insurance risk when enrollment expectations began to greatly exceed early projections? 2) Should the Medicaid expansion line-of-business proposal have been withdrawn when the federal government did not allow accurate actuarial projections to guide setting appropriate policy premiums?

In summary, it is truly tragic that a not-for-profit, cooperative effort to provide competition in the private, for-profit insurance marketplace and which had such success in enrollment failed largely because, in my belief, of the actions — and inactions — of both the federal government and the state of Iowa. Such actions undermine many basic principles of health insurance. In his article, Tony Leys quotes a national expert on health law who says, “CoOportunity Health would be the poster child for what went wrong with Obamacare.” He also quotes Governor Branstad’s health adviser, who says, “This is yet another example of the federal government’s unsustainable health-care system.” I believe neither of these statements reflects the benefits for millions of Americans who now have health-care coverage. The Congressional Budget Office (CBO) projects that, by the end of 2014, 12 million formerly uninsured Americans will be covered either by the Obamacare insurance they purchased on the Exchanges or by newly expanded Medicaid programs.

I present this blog as a way to further this discussion. From my perspective, the tremendous enrollment success and the use of medical care by a population that was starved for medical nourishment indicates the need that will continue to be present in Iowa despite the absence of CoOportunity Health. What are the next steps for Iowa? Stay tuned.

Please note: This blog will continue through the Iowa caucuses in January 2016. I received a book for Christmas: Lowell Soike’s work titled Busy in the Cause — Iowa, the Free-State Struggle in the West, and the Prelude to the Civil War. Let’s say that I plan to be “Busy in the Cause” of promoting health-care reform and health-care coverage for at least another year.