Deep within the “fiscal cliff” deal approved by Congress this week was a cut few people expected or knew of: Axing federal funds for new, nonprofit health insurance cooperatives.
The cut won’t affect Montana’s co-op, which is farther along than any other health co-op in the nation, as it plans to start offering health insurance to Montanans later this year.
But it did torpedo the Montana co-op’s application to expand into Wyoming and Idaho – where no co-op has been formed.
“It kind of caught us by surprise,” said Jerry Dworak, CEO of the Montana Health Cooperative. “We thought (our application) was rock-solid and probably the most efficient way to bring a cooperative into those other two states.”
Co-ops have been approved in 24 states. Yet congressional negotiators stuck language in the fiscal-cliff bill this week that eliminated all funding for any future co-ops, halting efforts to form co-ops in 26 states.
John Morrison, a Helena attorney and president of the National Alliance of State Health Co-ops, said this week that the cut doesn’t save that much federal money, because the co-ops are expected to repay their start-up loans.
“It was done quietly and quickly in the dark, by someone who wanted to do in the co-ops,” he said. “The only conclusion you can draw is that this part of the deal … was about capitulating to certain big insurance companies that want to stop the progress of the co-ops.”
The co-ops are part of the 2010 Affordable Care Act, inserted as a compromise after the elimination of the “public option,” which would have been a government-run health insurer to compete with private insurance.
The member-owned co-ops are supposed to offer a health-insurance alternative in states dominated by one or a few private insurers.
The federal government last year awarded $58 million in loans to Montana’s co-op for start-up costs.
U.S. Sen. Max Baucus, D-Mont., played a key role in getting the co-op language into the bill and has opposed attempts to cut funding for the co-ops.
On Friday, Baucus said he fought “tooth and nail” to make sure this week’s cut didn’t affect the Montana co-op.
“It’s a shame to see a target painted on a program like co-ops, because they are exactly the types of grassroots solutions we should be investing in now, to help us lower spending over the long term,” he said.
Baucus staffers said Baucus will continue to look for ways to reinvest in the program, but that it would be an uphill battle.
Funding for the co-ops nationwide was sliced last year in budget negotiations.
Dworak said the Montana co-op had done a feasibility study on expanding to Wyoming and Idaho, and found that the costs would be relatively small. The group also had rounded up considerable support in both states.
“(The study) showed that we could break even or even make money in the operations in the other states,” he said.