HHS Cash Encourages New CO-OPs

The Department of Health & Human Services (HHS) announced July 18 proposed standards for Consumer Oriented and Operated Health Plans (CO-OPs). Far from simply dictating rules, HHS is also offering cash to help establish would-be CO-OPs. Eligible organizations seeking to establish a CO-OP will be able to apply for a portion of the $3.8 billion in repayable loans made available under the Affordable Care Act to fund start-up and capitalization costs.

HHS describes CO-OPs as “private, non-profit health insurers with a board made up of members, designed to offer quality, affordable, consumer-friendly health plans in every state.” CO-OPs will sell health insurance coverage, much like health maintenance organizations (HMOs) or preferred provider organizations (PPOs), and will be subject to the same rules. CO-OPs are intended to increase competition and give consumers and small businesses additional affordable health insurance choices.

“CO-OPs will provide consumers more choices, greater plan accountability, and help ensure a more competitive insurance market,” said Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, in a Centers for Medicare & Medicaid Services (CMS) press release.

CO-OPs will sell coverage through the states’ Affordable Insurance Exchange, and may also sell coverage to small businesses through the states’ Small Business Health Option Programs (SHOP Exchanges). According to the HealthCare.gov newsroom, CO-OPs will differ from other insurers in a number of ways:

A CO-OP gives its enrollees a say in their health plan. CO-OP members elect the board of directors, a majority of whom must also be enrolled in the CO-OP health plan.

A CO-OP uses profits to benefit enrollees. CO-OPs are required to use their profits to lower premiums, improve health benefits, improve the quality of health care, expand enrollment or otherwise contribute to the stability of coverage for members.

A CO-OP educates enrollees about the plan. Because a CO-OP relies on its enrollees to help decide the direction of the plan, communication about key features of the plan will be a high priority.

The CO-OP program provides for loans to private entities, with the goal to create a new CO-OP in every state. All CO-OP loans must be repaid with interest and loans will only be made to private, nonprofit entities that demonstrate a high probability of becoming financially viable. Loan recipients are subject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period plus 10 years. For example, HHS will conduct audits, including site visits, and CO-OPs must meet achievement “milestones,” as laid out in their loan term agreements.

CMS will accept comments on the proposed rule until Sept. 16.

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