- Associated Press - Wednesday, February 5, 2014

MONTPELIER, Vt. (AP) - A U.S. House committee that has been sharply critical of the federal Affordable Care Act directed some of its ire at the defunct Vermont Health CO-OP in a report issued Wednesday.

The report from the House Committee on Reform and Government Oversight said the Vermont Health CO-OP, which dissolved in September after failing to get a state license, cost taxpayers $4.5 million and was an example of lax federal oversight of co-ops set up under the health care law.

The report cited a state review that found conflicts of interest in the CO-OP’s leadership, a low likelihood that it could gain its footing financially, and the compensation of its board chairman, Mitchell Fleischer.

Fleischer was paid $126,000, versus the $28,900 paid to the board chairman of the much larger Blue Cross Blue Shield of Vermont. The state Department of Financial Regulation also criticized Fleischer’s salary.

Both the house committee and state agency cited the CO-OP’s selection of Fleischer’s company, Fleischer Jacobs & Associates, to market CO-OP products as a conflict of interest.

The committee said CO-OP executives were “not well-qualified for their positions,” and seconded the state’s finding that the CO-OP’s pricing for its insurance products would made it uncompetitive with other Vermont insurers.

The committee report also criticized the CO-OP’s efforts to lobby Gov. Peter Shumlin and other officials to win state approval.

The federal government recouped or had not yet paid out most of the $34 million the CO-OP was originally supposed to get, but the report said the government gave the CO-OP about $4.5 million. It blamed the federal Centers for Medicare and Medicaid Services for lax oversight.

“The story of the Vermont Health CO-OP is a cautionary tale of how excessive risk, serious conflicts of interest, and inexperience escaped the attention of CMS,” the committee report said. Without diligent state oversight, “it is entirely possible that American taxpayers could have lost far more than $4.5 million.”

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