California sets rules for nonprofit, member-owned plans

California has moved one more step toward bringing a new type of health plan to life.

California Gov. Jerry Brown, D, has signed state Assembly Bill 1846 into law.

The law based on A.B. 1846 will set the rules that will govern any Consumer Operated and Oriented Plan (CO-OP) that does business in California. The law is set to take effect Jan. 1, 2013.

Drafters of the federal Patient Protection and Affordable Care Act of 2010 (PPACA) created the CO-OP program in an effort to address lawmakers’ concerns about a high level of concentration in some states’ health insurance markets.

A CO-OP is supposed to be a nonprofit, member-owned health insurer that would get most of its business from individuals and small groups. It could tap a $3.8 billion federal CO-OP startup fund, and it would have a guaranteed right to sell coverage through the new PPACA health insurance exchanges, or Web-based insurance marketplaces, that are on track to start up in 2014.

The A.B. 1846 law calls for the California Department of Insurance to regulate any CO-OPs that do business in the state. A CO-OP will have to follow all laws that relate to health insurers or health care service plans, and the owners will be prohibited from converting the CO-OP to for-profit status or selling it to a for-profit entity or any “non-consumer-operated entity,” California department officials said in an announcement of the bill signing.

A.B. 1846 was introduced by Assembly Member Richard Gordon, D-Menlo Park, Calif., and sponsored by the California Department of Insurance.