Why Did the ACA Co-Op Program Fail? Lessons for the Health Reform Debate

The ACA created a new type of nonprofit health insurance entity, the “Consumer Operated and Oriented Plan” (“co-op”). Most of the newly created co-ops soon lost money, and only 4 of the original 23 remain. We interviewed key stakeholders and conducted in-depth case studies of 3 of these co-ops. We discovered that politicians and regulators made it unlikely the program could succeed, that most of the co-ops did not have the management capacity to overcome these political obstacles, and that even those with good managers lacked the needed fiscal resilience. We also considered lessons suggested for those proposing a newly created “public option.” The main one is that a successful public option requires a supportive political environment, strong management, and significant fiscal capacity, none of which comes easily. A better route may be a quasi-public option in which the government subcontracts the operation of its newly created plan to a private firm. Although it is uncertain whether federal regulators have the capacity to hold such private for-profit firms accountable, pragmatism suggests that a combination of public-sector regulation and private-sector implementation may be the most direct path toward a US version of affordable universal coverage.