The CO-OP future is looking a little ... clearer. Maybe. (AP Photo/New York City Opera, Carol Rosegg)

Officials at the CCIIO, an arm of the U.S. Department of Health and Human Services (HHS), said in a new set of CO-OP program guidance that, under the laws that are in effect today, organizations that start CO-OPs can never sell the plans to a buyer that wants to convert them to for-profit status.

Conventional health insurers definitely cannot start CO-OPs, but employees of health insurers who are not leaders or managers at the conventional insurers can also work at CO-OPs.

“Third-party administrators” (TPAs) – independent firms that run health plans for large employers, associations or other entities other than health insurers – can run CO-OPs.

“Consistent with the statute and notice of proposed rulemaking …, a third party administrator may develop a CO-OP unless the third party administrator was also a licensed health insurance issuer on July 16, 2009,” officials said in the guidance.

THE HISTORY

Congress created the CO-OP program to PPACA when it drafted PPACA Section 1322.

If PPACA Section 1322 takes effect as written and works as drafters expect, CO-OPs will provide a nonprofit, member-owned alternative to for-profit insurers and to government-run health programs.

CO-OPs can sell coverage through the new health insurance exchanges that are supposed to start distributing individual and small group coverage starting in 2014.

To qualify for a CO-OP tax exemption, a CO-OP must be a “qualified nonprofit health insurance issuer” that is organized as a nonprofit, member corporation under state law and focuses “substantially all” of its activities on issuing qualified individual and small group health coverage.

A company cannot become a qualified issuer if it or a predecessor was a health insurer as of July 16, 2009, or if it is sponsored by a state or local government agency.

HHS expects to provide low-rate startup loans for would-be CO-OP starters.

MORE DETAILS

CCIIO has tried repeatedly to be as flexible as PPACA allows when writing regulations implementing PPACA provisions.

But, in an effort to be fair, officials have set a strict 75-page limit on applications for startup loans, and they have gone so far as to specific the typeface that applicants must use, in an effort to keep some applicants from using creative typography to squeeze in more words.

CCIIO officials noted in the guidance released today that applicants need not include in the spreadsheets for financial statement predictions in their application page counts.

Applicants should be able to identify likely operational partners, such as provider networks and reinsurers, but they can demonstrate the existence of the relationships with informal documents, such as letters of intent, and need not have completed formal negotiations, officials say.

The CO-OP statute “provides wide latitude in the operation of purchasing councils to buy services, such as third-party administrative services, reinsurance or [information technology] functions, for CO-OPs that would result in lower administrative costs, officials said.

A CO-OP is supposed show that it focuses “substantially all” of its activities on issuing qualified individual and small group health coverage by issuing at least two-thirds of the contracts it issues in the individual or small group markets.

But officials note that a CO-OP could easily serve a number of large organizations, such as hospitals that want to help a CO-OP get started by offering CO-OP coverage to its own employees.

“Each insurance policy or contract that an issuer sells constitutes a single activity regardless of the group size,” officials say. “For example, a firm of 40 insured workers and an individual exchange enrollee each count as single activity. Therefore a Medicaid or Medicare contract or a large group contract would be counted as one single activity.”

Other CO-OP coverage from LifeHealthPro: