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PPACA CO-OPs: Advocacy Group Raises Questions

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Members of the California Assembly Health Committee voted 13-6 earlier this week to approve A.B. 1846, a bill that would establish the laws that would govern the new “CO-OP” health plans in California.

The committee referred A.B. 1846 to the Assembly Appropriations Committee.

The drafters of the Patient Protection and Affordable Care Act of 2010 (PPACA) created the Consumer Operated and Oriented Plan (CO-OP) program to program in an effort to increase the level of competition in the health insurance market.

A.B. 1846 calls for California to put CO-OP plans under the jurisdiction of the California Department of Insurance and to handle CO-OP plans much the same way it handles existing policyholder-owned mutual insurers, Assembly legislative analysts say in a CO-OP bill analysis.

One difference between a CO-OP plan and a mutual insurer would be that the state would treat federal CO-OP “solvency loans” as surplus rather than as loans. 

PPACA Section 1322

PPACA Section 1322 calls for the plans to sell coverage through the new PPACA health insurance exchange system and get “substantially all” of their business from individuals and small groups.

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

A qualified CO-OP plan could have easier access to the new PPACA health insurance exchanges, or Web-based health insurance supermarkets, that are supposed to start selling coverage to individuals and small groups in 2014.

Although a CO-OP plan would offer coverage through the exchange system, it also could sell coverage outside of an exchange.

Program rules forbid for-profit health insurers from creating CO-OP plans or participating in CO-OP plan governance.

The federal Center for Consumer Information and Insurance Oversight (CCIIO), the CMS arm overseeing the program, are hoping entities to start CO-OP programs that will serve each state and the District of Columbia.

The CO-OP program has attracted the involvement of Freelancers Union, New York, and other groups often viewed as being consumer advocacy organizations.

Health Access California

In California, Health Access California, Sacramento, Calif., has been the most visible source of concern about A.B. 1846.

Health Access has backed employer health coverage mandates, proposals for establishing a government-run health plan option, and other coverage expansion proposals.

CO-OP concept supporters may not fully understand how the plans might work if the wrong kinds of laws are adopted, the group says.

One major challenge is that PPACA could free CO-OP plans from some of the quality and bargaining processes that would apply to other insurers participating in the PPACA exchange program, the group says, according to a summary providing by the Assembly legislative analysts.

Health Access has argued that a CO-OP is not an alternative to a “public option,” or government-run health plan.

California lawmakers should make sure that CO-OPs have to meet the same exchange requirements that other carriers participating in the PPACA exchange program face, the group says.

Lawmakers also should ” require that the members of the CO-OP be the individual consumers rather than employers,” according to the analysts’ summary of the group’s comments. “ Require a vote of the members to elect the CO-OP board. Prohibit any individual with financial interest in or income from an insurer, health plan or multiple employer welfare arrangement.”


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