Another pair of CO-OPs (Consumer Operated and Oriented Plans) received loans today from the the Centers for Medicare & Medicaid Services (CMS) under the health reform law, ratcheting up the count to 14, in as many states.
The loans Friday went to Compass Cooperative Health Network (CCHN) in Arizona and HealthyCT in Connecticut.
Compass Cooperative Health Network received $93,313,233; it is sponsored by “prominent local experts in insurance, chronic disease coordination, use of health information technology to better coordinate care, and business startup,” CMS states.
HealthyCT received $75,801,000, and is sponsored by the Connecticut State Medical Society (CSMS) and the CSMS-IPA (a statewide Independent Practice Association), and plans to offer high-quality, coordinated medical care with strong physician-patient relationships at its foundation.
The CO-OP program offers low-interest loans to eligible nonprofit groups to help set up and maintain these issuers.
To date, a total of 14 non-profits offering coverage in these 14 states have been awarded almost $1.152 billion in loans, according to CMS. The U.S. Department of Health and Human Services (HHS) pledged over $3 billion (originally $6 billion) in grants and loans in the PPACA to assist in the establishment of nonprofit, member-run these health insurance issuers. Thus, CMS is about halfway through its grant process.
CO-OPs were created by the Patient Protection and Affordable Care Act (PPACA) to encourage eligible new, innovative and consumer-responsive health insurance companies to increase competition in the individual and small business markets.
Grants and loans are to be awarded no later than July 1, 2013. Beginning in 2014, CO-OPs will offer plans through the affordable insurance exchanges.
The PPACA restricts the grants and loans from influencing legislation or intervening in political campaigns, while net earnings must be used to improve quality, reduce premiums, or improve benefits to members, as a report by Milliman describes. Thus, to ensure CO-OPs are truly new entities, the health care reform law prohibits any state-licensed health insurance company that existed on July 16, 2009 from qualifying for the CO-OP program.
CMS claims it will closely monitor CO-OPs to ensure they are meeting their program goals. To ensure strong financial management, CO-OPs are required to submit quarterly financial statements, including cash flow and enrollment data, receive site visits, and undergo annual external audits.
But it will be a challenge, as some have noted.
CO-OPs will most likely start with small enrollment; however, costly administrative systems and technology need to be in place from the beginning. Marketing will also be necessary to educate the public about the CO-OP.
Government funds are restricted, and can’t be used for marketing, as the Milliman paper, written in 2011 by Courtney R. White, a principal and consulting actuary with the Atlanta office, notes.
The CMS monitoring is concurrent with the financial and operational oversight by State insurance regulators. The CO-OPs are required to meet State and federal standards for qualified health plans to sell coverage through the Exchanges and the State’s Small Business Health Option Programs (SHOP Exchanges).
The largest loan has been to Freelancers Health Service Corp. in New York with an award amount of $174,445,000.