“The fiscal cliff deal, approved by Congress on New Year’s Day, eliminates most of the more than $1.4 billion in remaining funding from the federal health law for new nonprofit, customer-owned health plans designed to compete against the major for-profit insurers,” reports MedPage Today.

The withdrawal comes after a two-year period in which nearly $2 billion in loans were approved for 24 proposed state co-ops. Those loans will escape the cut, but no new loans can be approved for any additional co-ops.

“We were blindsided by the elimination of funds,” said John Morrison, president of the National Alliance of State Health Cooperatives. “The health insurance industry is getting its way here by torpedoing co-ops in the 26 remaining states. This is not about budgets; it is about those health insurance giants killing competition at the expense of millions of Americans who will pay higher premiums because of it.”

By signing the so-called fiscal cliff deal, it appears that President Obama knowingly “torpedoed” part of his own hard-fought health care law. Initially, the 2010 Affordable Care Act allocated $6 billion to help start co-ops and meet state insurance solvency requirements. “In 2011,” MedPage Today reports, “Congress reduced that funding to $3.4 billion as part of broader budget cuts.”

— Posted by Alexander Reed Kelly.

MedPage Today:

Proponents of the co-ops say such plans could offer lower premiums because they don’t have to generate profits for shareholders. Under the law, co-op plans must apply any surpluses to lowering rates or improving benefits or quality for their members. The co-ops are scheduled to open by next year.

In testimony before Congress last year, Morrison called skepticism about co-ops’ ability to compete “naive,” noting, “The large carriers are saddled with stockholder demands for profit, large overheads, antiquated legacy processing systems, and other inefficiencies.”

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