California Assembly Sends CO-OP Bill to State Senate

The California Capitol (A photo illustration based on an AP photo by Robert Durell) The California Capitol (A photo illustration based on an AP photo by Robert Durell)

California has moved a step closer to creating a regulatory framework for a new type of health plan.

The state Assembly voted earlier this week to approve Assembly Bill 1846,  a bill that would create the rules that would govern any Consumer Owned and Operated Plan (CO-OP) that does business in California. Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) added the CO-OP provisions in an effort to respond to concerns about a lack of competition in some states’ health insurance markets.

A CO-OP is supposed to be a nonprofit, member-owned health insurer that would get most of its business from individuals and small groups. It could get up startup loans and capitalization loans from the federal government, and it would have a guaranteed right to sell coverage through the new PPACA health insurance exchanges, or Web-based insurance marketplaces, that are on track to start up in 2014.

Under A.B. 1846, a CO-OP could be either a health insurer or a health maintenance organization (HMO). In California, the insurance department normally regulates health insurers and another department regulates HMOs. A.B. 1846 calls for the insurance department to regulate a CO-OP even if the CO-OP is an HMO.

A.B. 1846 was introduced by Assembly Member Richard Gordon, D-Menlo Park, Calif., and sponsored by the California Department of Insurance.

The California Senate Rules Committee is now deciding which Senate committees will have jurisdiction over the bill, according to the California state legislative tracking system.

At least one organization appears to be preparing to try to set up a CO-OP in California, according to Teri Boughton, a state Assembly analyst.

The California Asian Pacific Chamber of Commerce, Sacramento, and the Small Business Majority, San Francisco, are supporting A.B. 1846, saying it should increase the level of competition in the health insurance market.

Health Access California , Sacramento, has objected, saying the CO-OPs may have unfair advantages over other insurers competing on the exchanges and reduce the exchanges’ bargaining power, Boughton says.

The Assembly amended A.B. 1846 to try to increase oversight over the CO-OPs and address the Health Access California objections, Bouhgton says.


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