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Regulation and Compliance > State Regulation

Consultant: CO-OPs Get Flexible "Small Group" Definition

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The final regulations for the Consumer Operated and Oriented Plan (CO-OP) Program are similar to the draft version of the CO-OP regulations posted in July, according to Paul Keckley.

Keckley, executive director at the Deloitte Center for Health Care Solutions, Washington, says in a comment on the final CO-OP rule, which is set to appear in the Federal Register Tuesday, that one of the most notable feature is the definitions regulators use.

The U.S. Department of Health and Human Services (HHS) is developing CO-OP program regulations in an effort create a new breed of nonprofit, member-owned health plans.

Members of Congress put the CO-OP program provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) to create a compromise between Democrats who wanted PPACA to create a govPPACA regsernment-run “public option” and Democrats who wanted PPACA to preserve the current commercial health insurance market as much as possible.

A CO-OP is supposed to make “substantially all” of its sales to individuals and small groups.

A CO-OP could operate in a whole state or in part of a state, or it could operate in multiple states. A CO-OP would be licensed as an insurer in each state in which it operates.

The CO-OP section of PPACA, PPACA Section 1322, calls for HHS to make $3.8 billion in CO-OP startup loans available to would-be CO-OP organizers.

HHS officials say in the preamble to the final rule that they proposed that “substantially all” of their business could mean two-thirds of their business. Some commenters suggested that regulators simply require the CO-OPs to get half of their business from individuals and small groups; other commenters suggested that the CO-OPs should get 80% to 90% of their business from individuals and small groups.

HHS officials ended up making “substantially all” two-thirds in the final rule.

“The final rule mirrored closely the interim rule and offered no surprises,” Keckley says.

The provision definining “substantially all” is interesting, because it appears to be so flexible that a CO-OP “small group” operation could get much of its business from large companies and trade groups, Keckley says.

Only four states—Minnesota, Washington, Idaho and Wisconsin—have CO-OPs with 2.1 million members total; they comprise just over 1 percent of the private insurance market. ACA Section 1322 provided $6 billion for the CO-OP program, but funding has been reduced. The proposed rule estimated that 57 entities could be funded with $3.8 billion.

Keckley notes that HHS believes it may have enough PPACA CO-OP funding to make startup loans to about 57 CO-OPs.

Today, he says, CO-OPs in four states — Idaho, Minnesota, Washington and Wisconsin — provide coverage for about 2.1 million people.

HHS has not talked much about the number of entities participating in its CO-OP startup loan program.

John Morrison, a former Montana insurance commissioner and chairman of the National Alliance of State Health Care Cooperatives, Helena, Mont., a group for CO-OP organizes, says in a statement welcoming the release of the final regulations that the CO-OP movement is “spreading like wildfire.”

“Americans are desperate for a new approach to health coverage,” Morrison says.


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