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.
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.