Filed Under:Markets, Employee Benefits

PPACA: Group Says CO-OPs Face Tough Vetting Process

CO-OP plan organizers say they're spawning healthy plans. (AP Photo/Los Angeles Zoo, Tad Motoyama)
CO-OP plan organizers say they're spawning healthy plans. (AP Photo/Los Angeles Zoo, Tad Motoyama)

The organizers of the new "CO-OP" program cooperative health insurers are facing plenty of competition and strict scrutiny, the head of their trade group says.

John Morrison, president of the National Alliance of State Health CO-OPs (NASHCO), Helena, Mont., gave those assurances in a letter sent on behalf of NASHCO to the Republican leaders of the House Energy and Commerce Committee.

The Republican committee leaders recently asked CO-OP backers to discuss how well prepared CO-OP organizers would be to pay back federal CO-OP startup and capital loans.

"We are confident that a close examination of the CO-OP movement will reveal what we already know: CO-OPs have tremendous potential to transform the health insurance market in positive ways," Morrison, a former Montana insurance commissioner, writes in the letter.

The drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) created the CO-OP program in an effort to increase the level of competition in the health insurance market. PPACA Section 1322 calls for the CO-OP plans to sell coverage through the exchanges, or Web-based health insurance supermarkets, that PPACA is supposed to create, and to get "substantially all" of their business from individuals and small groups.

A CO-OP plan could operate in a whole state or in part of a state, or in multiple states. A CO-OP would be licensed as an insurer in each state in which it operates.

Although a CO-OP plan would offer coverage through the exchange system, it also could sell coverage outside of an exchange, according to officials at the Center for Consumer Information and Insurance Oversight (CCIIO), the arm of the U.S. Department of Health and Human Services (HHS) responsible for bringing the CO-OP program to life.

The CO-OPs funded by HHS so far are all members of NASHCO, and most of the CO-OP projects under way across the United States are active in NASHCO, as well, Morrison says.

"The individuals forming these CO-OPs have impressive resumes, and represent wide-ranging backgrounds in business, health insurance, government, labor, academia, and community leadership," Morrison says.

Applicants for CO-OP loans were required to present detailed business plans and demonstrate the ability to obtain private support, Morrison says.

"A top national firm applies strict scrutiny to ensure that approved applicants clear these bars and others," Morrison says. "In the first round, most applicants were not successful. Moreover, as they execute their plans and prepare to launch in 2014, the successful CO-OP applicants are required to meet a steady series of milestones in order to qualify for continued loan funding, and this will remain the case for the 5-year life of the start-up loans and the 15 year life of the solvency loans."

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