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The Co-ops Collapse: How GOP & Insurers Undercut Obamacare’s Nonprofit Option, Leaving 500K Uninsured

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As the Obamacare open enrollment period begins, it’s the end for many healthcare co-ops, leaving hundreds of thousands of people scrambling to find coverage. The co-ops were founded to offer a cheaper alternative on insurance exchanges after Democrats stopped demanding a public option. But since going live three years ago, the co-ops have faced major cutbacks from the Republican-controlled Congress. Now the system is faltering, with at least eight health insurance co-ops shutting down. The co-op closures have left some 500,000 people without insurance—and a marketplace of fewer choices and higher prices. It’s the kind of scenario that advocates of a single-payer system warned about from the outset: With Obamacare relying on for-profit insurance companies to provide coverage, the market will find a way to squeeze out those who need it most. We are joined by three guests: physician, professor and single-payer advocate Dr. Steffie Woolhandler; Wendell Potter, a former insurance executive turned whistleblower; and Julia Hutchins, chief executive officer of Colorado HealthOP, a consumer-directed, nonprofit health cooperative in Colorado that was forced to shut down last month.

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: Open enrollment has begun in the health exchanges created under the Affordable Care Act for uninsured Americans. But this year, many shopping for coverage find themselves without their most affordable choice: independent, nonprofit cooperatives. The co-ops were founded to offer a cheaper alternative after Democrats stopped demanding a public option. But since going live three years ago, the co-ops have faced major cutbacks from the Republican-controlled Congress. The GOP has slashed funding by more than half and stopped the Obama administration from helping offset the unexpected high costs of covering sicker beneficiaries.

Now the system is faltering, with at least eight health insurance co-ops shutting down. A turning point came last month when all exchange providers were told the federal government would only pay them a small percentage of what they were expecting. The co-op closures have left some 500,000 people without insurance—and a marketplace of fewer choices and higher prices. It’s the kind of scenario that advocates of a single-payer system warned about from the outset: With Obamacare relying on for-profit insurance companies to provide coverage, the market will find a way to squeeze out those who need it most.

For more, we’re joined by three guests. Dr. Steffie Woolhandler is with us in New York, primary care physician, professor at the CUNY School of Public Health at Hunter College, co-founder of Physicians for a National Health Program, where she’s been a vocal advocate for single payer.

Wendell Potter also joins us in Philadelphia, a former insurance executive turned whistleblower and senior analyst on healthcare at the Center for Public Integrity.

And we go to Denver to Julia Hutchins, chief executive officer of Colorado HealthOP, a consumer-directed, nonprofit health cooperative in Colorado. Last month, state regulators forced Colorado HealthOP to shut down, saying it isn’t in strong-enough financial shape to pay out its members’ claims. Colorado HealthOP tried to challenge the closure but was denied.

We welcome you all to Democracy Now! Steffie Woolhandler, let’s begin with you. In New York, there are well over 200,000 people who are—have insurance under what’s called Health Republic, one of these healthcare co-ops. Suddenly, last Friday, to the shock of many—even people working within the system—they were told that this healthcare co-op will close by the end of the month. That’s November. That’s before you can even get coverage in this open enrollment period. The next time is January 1st. So they have to sign up twice—right now, to fill the gap to the end of December, and then, because of IT issues—they can’t just sign up now and get that insurance from now on in another company—they have to sign up now ’til the end of December, and sign up within the open enrollment period, like a day later, for getting insurance in January. Over 200,000 people are out of insurance.


AMY GOODMAN: Just in New York alone.

DR. STEFFIE WOOLHANDLER: Just in New York. And 10 of the 23 co-ops have closed, and several more are expected to close soon. These nonprofit co-ops, many of us felt they were never going to be viable. These tiny insurance co-ops was like the peewee football going against the NFL. They just didn’t have the size to make it in the marketplace.

But also, they weren’t cheaters. And the way the health insurance market works is good guys finish last, and cheaters win. The way you make a killing in the health insurance market is by signing up lots of healthy people, collecting as high premiums as possible and giving them as little care as possible—and, if they get sick, figuring out ways to force them out of the insurance. That’s the way the U.S. insurance market works. And these small nonprofit co-ops were not very good at playing the game. Many of them didn’t want to play that game.

So, we’re not surprised they went under. You know, the only way to insure a population, that has worked, is through some form of nonprofit national health insurance. That’s what every other developed nation uses. And then you have everybody in what we call the same risk pool—everyone in, nobody out.

AMY GOODMAN: We’ll talk about single payer in a moment. But, Wendell Potter, can you go back to when the Affordable Care Act was being debated and what was promised and what you said at the time? Now, you worked in several insurance companies. You worked, what, for Aetna—you were a top executive—as well as?

WENDELL POTTER: Humana and Cigna.

AMY GOODMAN: Mm-hmm, so Humana, Cigna, Aetna. Talk about what you were saying then. You were a whistleblower back in 2009.

WENDELL POTTER: Yeah. What I saw was that the—as you may remember, the public option was being proposed and had quite a bit of support in Congress. But over in the Senate, in the Senate Finance Committee in particular, Max Baucus, who was chairing the committee at the time, put together what came to be called the Gang of Six—three Republicans and three Democrats that he handpicked. He chaired this little group, with the idea, the hope, that some bipartisan legislations—some bipartisan reform legislation could be crafted and passed. It was a fool’s errand from the beginning, obviously. But out of that, Senator Kent Conrad, a Democrat of North Dakota, proposed that instead of the public option, Congress should authorize funding to create these co-ops.

And I wrote at the time that it would be great if that could—if we had a world in which those co-ops could succeed, but it was just sheer folly to think—and fantasy, to think that that could actually happen. And it’s because of largely what Steffie said: They would have to compete with these very, very large for-profit insurance companies, like the ones that I used to work for. I know what the barriers to entry—and in any market in this country, what those barriers are. They’re very, very high. And unless you have incredible capitalization, they’re just not going to succeed. I told—I testified before a Senate panel—a congressional panel, just a few weeks after that, that if Congress passed legislation without a public option, that they might as well call what they ultimately passed the Health Insurance Profit Protection and Enhancement Act.

And, Amy, that’s exactly what has happened. Since the Affordable Care Act went into effect, the for-profit insurance companies have thrived. Their stock prices more than tripled, and in some cases quadrupled, while the co-ops have been starved of funding, have not been able to overcome those barriers. And as we know, many of them are closing and leaving a lot of people in the lurch.

AMY GOODMAN: Julia Hutchins, you’re the CEO of the Colorado HealthOP. Tell us how many people you served, when you were established and what happened in the last period.

JULIA HUTCHINS: We were established through this program, the co-op program under the Affordable Care Act. And we still today serve 80,000 Coloradans through the end of the year.

AMY GOODMAN: So tell us what happened.

JULIA HUTCHINS: It was the story—maybe it’s an old story of politics and fear. Certainly, the program, part of a bipartisan compromise, it may be one of the only programs in the Affordable Care Act that really addressed competition and the need to make health insurance affordable for people. We talk a lot about access to care, but access to care is so connected to cost. So we’re a program—from the beginning, if the rules had stayed the same, which they never do, we’d still be here. But through continued cuts by Congress and then, really, at the end—I mean, where was Obama? Where is Obama now? At a time when the big insurance companies are getting bigger, what this country needs is solutions that keep healthcare local and that really engage people in their own healthcare and provide options for personalized care. And the co-op program is still around. And really, while it lost—though it was politically orphaned in the process, it still is a strong foundation to build from.

AMY GOODMAN: So, what do people do? How do you get in touch with them to tell them that their health insurance has ended? Is it possible they’ll miss it?

JULIA HUTCHINS: It is. And we’ve done everything we can. We’ve been very, very vocal. And even before we closed, we—all our members were up in arms. We had over 500 people write to Congress in one day, and have been doing everything we can to make sure people know. We do worry about, as it gets closer to the end of the year, that there are people who are in the hospital or in treatment programs, and that they’re focused on her health and not their health insurance. And a lot of our efforts, as we close out the year, are making sure we find those people and help them transition to something else and help them keep coverage. I mean, that was one of the beautiful things about the co-op program, regardless of where we sit today, is that we were the ones hitting the streets and talking about the value of coverage and getting people insured. And in some ways, we were a very cheap way to be able to do that.

AMY GOODMAN: Dr. Steffie Woolhandler, you’re smiling as you hear that.

DR. STEFFIE WOOLHANDLER: Well, I think we are going to need a national financing system. We can certainly have a local control of healthcare. In fact, a national financing system would give people their free choice of doctors or hospitals, which facilitates local control. But I do think we’re going to need that single-payer, nationally based financing to make this work.

AMY GOODMAN: Do you see that at all happening? And this goes to the issue of single payer. Where is the state of the movement today? You have the Republicans attacking Obamacare, saying they’d like to see it end. It’s one of their number one issues, though they’ve let go a little bit, saying it’s unrealistic, as millions more people have been insured and the healthcare system is now completely—revolves around the Affordable Care Act.

DR. STEFFIE WOOLHANDLER: Yeah, well, the Affordable Care Act is the new status quo, and it’s completely inadequate. We’ve still got 33 million people uninsured. Even when we’re fully implemented with the Affordable Care Act, we’re going to have 25 million uninsured. That’s just unacceptable. And then tens of millions more are getting these plans that are really underinsurance, with huge copayments and deductibles, meaning they pay for the insurance and they still can’t afford care. So we still need to be working for single payer, which is the only thing that can really provide everybody with affordable coverage.

I was just at the national meeting of Physicians for a National Health Program. We had hundreds and hundreds of people in Chicago. The students were there. They formed 52 new medical school chapters of Physicians for a National Health Program in the last year. There was a large Healthcare-NOW! meeting, which is the non-physician organization. It was sponsored by the steelworkers’ union and the national nurses’ union, with hundreds of non-physician activists. They are committed to single payer. So, we know we have a ways to go, but we’re on our way to really building the movement that will get Americans the single-payer health system that they deserve.

You know, single payer works because you save $400 billion a year in administrative costs, and you can take that money and improve care for everyone. And that’s what we need.

AMY GOODMAN: In December 2009, during the debate over the Affordable Care Act, Vermont Senator—now presidential candidate—Bernie Sanders advocated for a single-payer system. This is what he said.

SEN. BERNIE SANDERS: What’s the answer? Well, I don’t think anyone has a perfect answer, but I do think that the United States should be looking at other countries around the world. Why do we end up spending so much and get relatively poor value for what we are spending? And I think when we do that, when we look at countries throughout Europe, Scandinavia, Canada and so forth, I think it leads one to the conclusion that if we are serious about providing quality, affordable care to all Americans in a cost-effective way, then we must move toward what many of us call a Medicare-for-all, single-payer program. Now, I understand, as I think many people do, that because of the power of the insurance companies and the drug companies and the medical equipment suppliers, because of their campaign contributions, because of their lobbying, the truth of the matter is that a single-payer program has never been on the table from day one, since this whole discussion began. And I think that that is very, very unfortunate.

AMY GOODMAN: Now, that’s a Democratic presidential candidate, Bernie Sanders. Republican presidential candidate Donald Trump also spoke about how he supports a single-payer healthcare.

DONALD TRUMP: As far as single payer, it works in Canada. It works incredibly well in Scotland. It could have worked in a different age, which is the age you’re talking about here. What I’d like to see is a private system without the artificial lines around every state. I have a big company with thousands and thousands of employees. And if I’m negotiating in New York or in New Jersey or in California, I have like one bidder. Nobody can bid. You know why? Because the insurance companies are making a fortune, because they have control of the politicians—of course, with the exception of the politicians on this stage. But they have total control of the politicians. They’re making a fortune. Get rid of the artificial lines, and you will have yourself great plans. And then we have to take care of the people that can’t take care of themselves. And I will do that through a different system.

BRET BAIER: Mr. Trump, hold on one second.

SEN. RAND PAUL: Hey, Bret, Bret, I’ve got a—I’ve got a news flash.

BRET BAIER: I know, hold on, Senator Paul.

SEN. RAND PAUL: News flash: The Republican Party’s been fighting against a single-payer system—


SEN. RAND PAUL: —for a decade. So I think you’re on the wrong side of this if you’re still arguing for a single-payer system.

DONALD TRUMP: I’m not—I’m not—I don’t think you heard me. You’re having a hard time tonight.

BRET BAIER: All right.

AMY GOODMAN: That was Donald Trump and a little bit of Rand Paul there, Donald Trump in the first Fox presidential debate, and before that, Bernie Sanders. Your response to this, Wendell Potter?

WENDELL POTTER: Well, I think Senator Sanders is exactly right. And it’s such a shame that Congress did not give serious consideration to single payer when it began debate on healthcare reform. And he’s right, too, we should have looked at what works in other countries. But we didn’t. We only looked at what we currently have. And as Uwe Reinhardt, a health policy expert, has called it, the Affordable Care Act is, in many cases, an ugly Band-Aid on an ugly system. And it’s not a system that can be sustained.

Donald Trump made a very good point that other countries really like their single-payer systems. And in those countries, they spend far less on healthcare, and their outcomes are much better than ours in this country. And there’s no reason to think that the era has passed that we can’t do that in this country.

I think what you’re going to be seeing is that not just individuals and physicians are going to be becoming less and less enchanted with their healthcare system, but I think you’re going to see business leaders become more and more disenchanted, as well, too. The Affordable Care Act has done some good. It’s reformed—it put some insurance reforms in place and has brought some people into coverage. But again, as Stephanie said, many of those people now are underinsured, and it has not done very much at all to control cost. And the private insurance companies—this is where I think business leaders are finally going to start catching on. Private insurance companies cannot control cost. If they could, we would not be in this situation we are now. So I think that we will start seeing a broader coalition of people coming together to support single payer in the months and years ahead.

AMY GOODMAN: Julia Hutchins, do you feel that the private insurance industry worked together to try to get your co-op and the other co-ops across the country defunded?

JULIA HUTCHINS: Absolutely. In some ways, we were so heads down, doing the right thing for our members, and a populist movement at its core, we really underestimated how threatening we were to the existing players in the healthcare system. And this country needs something that works for people and for physicians. And that’s what healthcare care is about. It’s about that patient-physician relationship, and we’re getting farther and farther away from that through big health insurance companies. We don’t need mass-produced healthcare. We need it to be local and personalized.

AMY GOODMAN: You know, we heard that in New York this massive healthcare co-op, Health Republic, which serves over 200,000 people, would be closing at the end of the year. Then suddenly, last Friday, they announced, no, it will be at the end of the month, which leaves people to sign up twice. Now, who benefits from this? Why leave 200,000 people out in the lurch? Is it the providers that put pressure, fearing that they would get, what, 50 cents on the dollar, or whatever, so the hospitals and the doctors say, “No, we want to be paid, so they will be shortchanged, the patients”? Is this a matter of organizing and grassroots activism?

DR. STEFFIE WOOLHANDLER: OK. Well, an insurance company needs large reserves to do its job, and the state regulators came in and said, “You didn’t have enough reserves.” The question is why they didn’t have enough reserves. And it’s twofold. First of all, these were the good guys, who were cooperative and were trying to enroll people and provide them with the care they needed. And that’s why they were spending more money. That’s why they had low reserves. And the second thing is that Congress has repeatedly cut the funding to the co-ops, so that they started with lower reserves, and they got—they missed out on the subsidy that they had been promised to subsidize the care for high-cost patients. So, the regulators were just doing their job. You can’t run an insurance company without reserves. But the question is, you know, why the reserves were so low. And the fingerprints of the health insurance industry are all over this. They are some of the biggest lobbyists in Congress, along with the pharmaceutical industry, which also doesn’t want any sort of a public, nonprofit involvement in the healthcare system.

AMY GOODMAN: Wendell Potter, you talk about “the casino effect.” What is that?

WENDELL POTTER: Well, the casino effect is, we, in this country, have to gamble on our lives and with our money. What we are forced to do in this country is, especially if we don’t get coverage through the workplace, of going through the exchanges to get coverage, and make some assumptions about how healthy we’re going to be in the coming 12 months. No one can really do that. You can’t predict if you’re going to come down with a serious disease or get badly injured. But a lot of people just think that they’re going to continue to have another year of good health, and so often they make very bad decisions. They make bad bets in this, what I call a casino of health insurance. And even if you do get coverage through the workplace, you’re often having to make the same decision, because even employers are pushing more and more of their workers into these high-deductible plans, with the promise that your premiums might not be as high as they otherwise would be, but you’re going to have to pay a lot more money out of your own pocket. And most people are just not able to predict, obviously, how much money they might need to spend on their healthcare. So, unfortunately, so many people are finding themselves now underinsured, and only find that out, frankly, when it’s too late. And in many cases, people who have insurance are still having to go to bankruptcy because of high medical debt.

AMY GOODMAN: We’re going to leave it there, but of course we’ll continue to cover this issue. I want to thank Dr. Steffie Woolhandler, primary care physician here in New York, professor in the CUNY system, City University of New York. Julia Hutchins, thanks for joining us from Denver Open Media, chief executive officer of Colorado HealthOP, which has just gone under. And thanks so much to Wendell Potter, former health insurance executive, author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR Is Killing Health Care and Deceiving Americans.

This is Democracy Now! When we come back, The Price We Pay. Stay with us.

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