WASHINGTON — Fed up with the insurance industry, Democrats used the health care overhaul to create nonprofit co-ops that would compete with the corporations. Now a government audit finds co-ops are awash in red ink.
Only one out of 23 — the co-op in Maine — made money last year, said Thursday’s report from the Health and Human Services inspector general’s office. Thirteen lagged far behind their sign-up goals for 2014.
The Massachusetts co-op spent more than six times more on administrative expenses than it collected in premiums.
The audit raised questions about whether co-ops will be able to repay $2.4 billion in taxpayer-financed loans that President Obama’s overhaul provided to help stand them up.
‘‘The low enrollments and net losses might limit the ability of some co-ops to repay startup and solvency loans, and to remain viable,’’ the report said.
The inspector general recommended closer supervision of the co-ops by the Obama administration as well as clear standards for recalling loans if a co-op is no longer viable.
One of the 23 co-ops in the report is already out of business. The Iowa/Nebraska co-op was shut down by state regulators over financial concerns. Another one, the Louisiana Health Cooperative, announced last week it will cease offering coverage next year, saying it’s ‘‘not growing enough to maintain a healthy future.’’
Although the audit only goes through the end of 2014, problems apparently persisted into this year. A preliminary review of 2015 data by government officials shows that enrollments have increased, but co-ops continue to report financial losses.
A trade group representing co-ops took issue with the report. It ‘‘reveals little in the way of new information about co-ops, and unfortunately relies primarily on seven-month old data,’’ Kelly Crowe, chief executive of the National Alliance of State Health CO-OPS, said in a statement. The group says total co-op sign-ups more than doubled this year, to more than 1 million people.
Officially called Consumer Operated and Oriented Plans, co-ops were a compromise in the 2009-2010 health care debate.
Liberals failed to achieve their goal of a government-run insurance program to compete with corporate insurers, and co-ops became the fallback.
As recently as the spring, the White House touted co-ops as an accomplishment. The audit paints a very different picture. Among its findings:
■ Maine was the only co-op in the black for 2014, with $5.9 million in net income. Losses ranged from a high of $50.4 million for Kentucky’s co-op to $3.5 million for Montana’s.
■ Thirteen co-ops fell far short of their enrollment projections, and nine met or exceeded them. New York enrolled 155,400 people, more than five times what it had projected. But co-ops in Arizona, Illinois, and Massachusetts only hit 4 percent of their enrollment targets.
■ Low enrollment and medical claims expenses that exceeded the income from premiums contributed to the losses. Nineteen co-ops had medical claims that exceeded premiums. Per-enrollee administrative costs for the co-ops in 2014 were calculated. They ranged from a high of $10,900 per member in Massachusetts to $430 in Kentucky. Fourteen co-ops had administrative costs of more than $1,000 per member.
The audit found that the Massachusetts co-op collected $2.9 million in premiums, and spent $18.5 million on administration.