The U.S. Department of Health and Human Services (HHS) has recently released proposed regulations for the Consumer Operated and Oriented Plan (CO-OP) program – an initiative that is supposed to create a new type of nonprofit, consumer-governed health insurer.
The PPACA envisioned that the CO-OPs will begin selling qualified health plans through the new health insurance exchanges that are set to open for business in 2014.
PPACA bill negotiators added the CO-OP provision in an effort to bridge the gap between Democrats who wanted to create a single-payer, "Medicare for all program" and other politicians who favored a more market-oriented approach.
The PPACA provided HHS with funding that will provide two rounds of loans to help CO-OPs get off the ground and operational for 2014. $600 million in loans will go to help CO-OP organizers develop business models. $3.2 billion will go to help CO-OPs that are in operation have enough capital on hand to cover unexpected claims. According to National Underwriter, HHS wants the loans to help CO-OPs meet the same solvency standards that apply to traditional for-profit insurance companies.
Because this effort is innovative and therefore risky, it should not be a surprise that HHS is estimating a default rate of 40% for the planning loans and 35% for the solvency loans. Becuase of this HHS plans on a case-by-case basis to manage individualized repayment schedules for each loan.
The CO-OP provision of the PPACA is designed to create a federal program that will provide startup loans and will begin selling qualified health plans through the new health insurance exchanges that are set to open for business in 2014.
During the PPACA's lengthy years-long negotiations the CO-OP provision was adeed in an effort to bridge the gap between Democrats who wanted to create a single-payer, "Medicare for all program" and other politicians who favored a more market-oriented approach.
The point of the loan repayment program is to create CO-OPs as similar entities with the same solvency standards that apply to traditional for-profit insurance companies.
HHS is estimasting a default rate of 40% for the planning loans and 35% for the solvency loans. HHS would work out individualized repayment schedules for each loan, officials say. If a CO-OP had trouble making its payments, HHS would consider keeping the plan solvent to be more important than recovering the principal, officials say.
CO-OPs have several provisions slated under the PPACA that create innovative health plan structures. These include the following:
- CO-OP regulations do not allow any entity that was selling insurance in 2009 from becoming a CO-OP,
- CO-OPs are also prohibited from converting to for-profit status,
- HHS is proposing that state university medical centers and their hospitals and physician practices would not be able to sponsor a CO-OP plan.
- HHS allows the creation of a “formation board” to get the cooperative under way, but it would require the election of an “operational board” by the members of the cooperative no later than one year after the organization began to provide coverage.
- At least two-thirds of the health insurance policies and contracts issued by a CO-OP plan in each state would have to be for qualified individual and small group health plans.
Robert Zirkelbach, a spokesman for America’s Health Insurance Plans (AHIP), says AHIP is still reviewing the proposed regulations. AHIP believes in principle that "there must be a level playing field where all companies providing insurance, including CO-OPs, are required to abide by the same rules and regulations," Zirkelbach says.
