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CO-OP Plans: The ACA's Public Plan Alternative


CO-OP Plans: The ACA's Public Plan Alternative


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An area of the Affordable Care Act (ACA) legislation that has not gotten a great deal of attention of late is the Consumer Operated and Oriented Plan (CO-OP). This is ther alternative that Democrats formulated when the original public plan option was discarded during the health care reform debate back in 2009.

To gain the needed votes of house and senate Democrats to pass the ACA after President Obama signaled that he was backing away from the inclusion of a public plan option, leading Democrates formulated the CO-OP plan as a mechanism to reatain key Democratic support. According to Allison Bell, at National Underwriter, Lawmakers put the CO-OP provision in the Affordable Care Act to win over liberal Democrats who had been lobbying to create a government-run, Medicare-like health insurance program that would have been open to individuals of all ages.

And now federal regulators are gathering information from the industry to begin formulating rules pursuant to the development of CO-Op plans. A notice will be printed soon by The Office of Consumer Information and Insurance Oversight (OCIIO), in the Federal Register seeking input on CO-Op plan development and implementation.

Section 1322 of the ACA implements the CO-OP system and if it takes effect as written, the CO-OP system will try to provide an alternative to the health coverage provided by for-profit carriers in the individual and small group markets, notes Bell.

So how does Section 1322 define a CO-OP plan alternative:

CO-OP "qualified nonprofit issuers must, as directed by the new law, operate with a strong consumer focus and use any profits to lower premiums, improve benefits, or improve the quality of health care delivered to plan members."

The federal Department of HEalth and Human Services, under the ACA, is scheduled to award loans and grants for CO-OP startup costs by July 1, 2013. Substantially all of the activities of the qualified nonprofit issuers must be in the individual and small group markets. The issuers must be licensed in the State(s) in which they operate. The CO-OP program shall provide for the awarding of loans and grants to provide assistance for the establishment of qualified nonprofit issuers.

Section 1322(c) of the Affordable Care Act defines a “qualified nonprofit health insurance issuer” as one:

  • Organized under State law as a nonprofit member corporation,
  • All CO-OP activities of which consist of the issuance of qualified health plans in the individual and small group markets, and
  • Meet other requirements of section 1322(c).

CO-OP Insurer Must Not be Insurer Previous to ACA Passage

To qualify for a loan or grant, the qualified nonprofit issuer (or a related entity or predecessor) must not have been a health insurance issuer on July 16, 2009 and must not be sponsored by a State or local government, any political subdivision thereof, or any instrumentality of such government or political subdivision. Section 1322(c)(4) provides that an organization cannot be a qualified nonprofit health insurance issuer unless any profits made by the organization are required to be used to lower premiums, to improve benefits, and for other programs intended to improve the quality of health care delivered to its members.

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