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Energy and Commerce Leaders Seek Information on Potential Cost to Taxpayers in CO-OP Program

Press Release

Location: Washington, DC

Members of the House Energy and Commerce Committee today sent a letter to Marilyn Tavenner, the Acting Administrator for the Centers for Medicare and Medicaid Services, seeking more information about the Consumer Operated and Oriented Plan (CO-OP) program. The program was established in the health care law to provide federal funding to create nonprofit health insurance issuers.

The committee is meeting this week to vote on budget reconciliation recommendations including repeal of the CO-OP program, rescinding any unobligated funds. While eliminating the program will prevent any additional funding from being issued, an estimated $845 million in start-up and solvency loans has already been awarded under this program. The Office of Management and Budget estimates that up to 50 percent of all loans may not be repaid, and a review of current awardees shows that some of the recipients may not meet the basic eligibility criteria in the law. For these reasons, the committee is launching a review of the implementation of the program to determine the potential risk to taxpayers.

Today's letter was written by Energy and Commerce Committee Chairman Fred Upton (R-MI), Health Subcommittee Chairman Joe Pitts (R-PA), Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL), and Commerce, Manufacturing, and Trade Vice Chairman Marsha Blackburn (R-TN).

"To date, the Centers for Medicare and Medicaid Services (CMS) has awarded 10 organizations -- offering coverage in 10 states -- over $845 million in start-up and solvency loans to help them establish private, non-profit, consumer-governed health insurance plans. Each of these states, to some extent, permits mutual insurance companies to issue "surplus notes.' However, according to the National Association of Mutual Insurance Companies, surplus notes are regarded by investors "as relatively high risk since they are both unsecured and subordinated to the interests of the policyholders,'" the members wrote.

"The potential losses to federal taxpayers are not the only concern. Past instances of insurer insolvency demonstrate the severe negative impact on the insurance markets," the members continued. "Finally, we are concerned that HHS is awarding loans to entities that do not meet the statutory requirements for eligibility in this program."

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