The Consumer Operated and Oriented Program (CO-OP) plans might have a chance to survive, according to Jordan Battani.

Battani, a principal researcher at Computer Sciences Corp. (CSC), Falls Church, Va., discusses the factors that could affect CO-OP plan performance in a commentary distributed by CSC — a company that could provide technology and consulting services for the plans.

Drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) included the CO-OP provision to compromise between advocates of creating a Medicare-like “public option” plan and advocates for protecting the current role of non-government health plans.

CO-OP plans are supposed to be nonprofit, member-owned health insurers that are self-sustaining but have no ties to commercial health plans or existing nonprofit health plans.

Battani says the new CO-OP plans will face formidable obstacles.

PPACA itself “will place powerful constraints on the operational alternatives and organizational structures available to newly forming CO-OPs,” Battani says. “They will be entering highly concentrated and competitive insurance coverage markets and will be unable to leverage the products, services or expertise of the established commercial insurance providers.”

PPACA prohibits governments from sponsoring CO-OPs, and CO-OPs may have trouble with guarding against adverse selection and running administrative systems, Battani says.

But, on the other hand, Battani says, PPACA is imposing new limits on all plans, on and off the new health insurance distribution exchanges, that could help level the playing field and create opportunities.

The U.S. Department of Health and Human Services (HHS) is setting up PPACA-required sources of CO-OP loans, and “the availability of low-cost capital from federal sources is the single best reason for new CO-OPs to form,” Battani says. “Additional benefits include the ability to form group purchasing councils for administrative and other support, as well as the ability to offer products through the insurance exchanges in direct competition with more established competitors.”

CO-OPs will get special tax breaks, and they may be able to keep costs down by taking steps such as participating in the new collective purchasing arrangements and teaming up with respected integrated provider networks, Battani says.

“The new CO-OPs may have an advantage in forming effective business relationships with provider organizations and networks in the post-health care reform environment simply because they are not traditional commercial carriers,” Battani says.

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