Federal regulators seem to be taking concrete steps to act when organizers of the new "Consumer Operated and Oriented Plan" insurers run into trouble.
Officials at the U.S. Department of Health and Human Services Office of Inspector General describe the regulators' efforts to oversee the CO-OP organizers in a new report on early implementation of the CO-OP loan program.
Drafters of the Patient Protection and Affordable Care Act tried to increase the level of competition in the individual and small-group markets by providing billions of dollars in startup loans for the CO-OPs.
Congress slashed funding for new CO-OP loans in December 2012, but it left HHS commitments to provide about $2 billion in funding for the 24 left intact.
HHS OIG inspectors have tried to track efforts by the Centers for Medicare & Medicaid Services to run the CO-OP program by looking at how CMS is handling the first 18 recipients of CO-OP startup loan funding.
Knowing how the CO-OPs will really do is hard to predict, HHS OIG officials said in the report.
"Although CO-OPs appear to be making progress, at the time of our review, they were still hiring staff, obtaining licensure, and building necessary infrastructure," officials said.
But CMS is trying to keep tabs on the organizers by having a CMS account manager meet with each CO-OP two to four times per month.
"CMS delayed portions of startup loans for five CO-OPs when they did not reach important milestones on time," officials said.
In three cases, officials said, CMS delayed access to funding when CO-OPs signed major contracts without getting CMS approval.
When one CO-OP proposed using its sponsor to perform main administrative functions, CMS reviewed the arrangement closely to ensure it was consistent with program requirements and avoided conflicts of interest, and that the CO-OP would account for all contract costs in its budget, officials said.