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Life Health > Health Insurance > Your Practice

PPACA: CO-OP Starters Might, or Might Not, Get Planning Aid

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Would-be CO-OP plan starters may be able to get help with paying for the actuarial studies and business plan development efforts needed to start the plans – but only if they win federal approval for their CO-OP applications.

Barbara Smith, an official at the Center for Consumer Information and Oversight (CCIIO) at the U.S. Department of Health and Human Services (HHS), talked about the CO-OP plan loan program today during a conference call aimed at individuals and entities interested in applying to participatePPACA.

Section 1322 of the Patient Protection and Affordable Care Act of 2010 (PPACA) created the Consumer Operated and Oriented Plan (CO-OP) program in an effort to encourage nonprofit groups to organize alternatives to traditional health insurance arrangements.

CO-OPs are supposed to be member-owned plans with member-dominated boards that have no ties to traditional for-profit or nonprofit health insurance issuers, or to trade groups representing health insurance issuers.

PPACA supporters included the CO-OP provision in the act to win support from Democrats who represent rural areas where cooperatives have been popular in many markets, and to win support from Democrats who were lobbying for PPACA to require that the federal government offer a Medicare-style plan for all in every state.

Congress provided $3.8 billion in loans that CO-OP organizers can use to start plans and meet state health insurance plan solvency plans. The plans are supposed to meet all state health insurance plan requirements and all PPACA coverage access requirements, such as provisions requiring plans to offer coverage on a guaranteed-issue, mostly community-rated basis.

Voluntary letters of intent to apply for the program are due “as soon as possible,” and the first due date for applications is Oct. 17. Decisions on applications are supposed to be made within 75 days of HHS receiving a complete application.

A plan may be able to use up to $100,000 of any startup loan money it gets to cover the cost of the actuarial studies, business plan preparation services and other work needed to persuade HHS officials that the plan will do well enough to pay its loans back.

Some callers asked Smith whether $100,000 will be enough money to create a successful CO-OP


“”We would like to see that applicants have the ability to be prudent purchasers,” Smith said.

Veteran contract evaluators and consultants at CCIIO believe a plan should be able to get the application done for less than $100,000, Smith said.

CCIIO is willing to let successful applicants use startup loans to cover costs directly related to preparing applications but not to preapproval other costs, such as the cost of studies with more than one purpose or management salary costs, Smith said.

“There’s just too much potential for waste and abuse,” Smith said.

Timothy Davis, a caller from Vermont, said he was not sure how easy it would be for a CO-OP plan to pay back any loans.

“The margins are looking might slim,” Davis said.

Smith told Davis plans will have 5 years to repay the startup loans and 15 years to repay the solvency loans.

Interest rates will be less than the rates on Treasury notes or bonds with comparable maturities, and the rates could be as low as 0%, officials say.

Other CO-OP coverage from National Underwriter Life & Health:


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