Officials found that some of the embryonic CO-OPs are having trouble with spawning. (AP photo/Tad Motoyama)

Organizers of many of the new nonprofit, member-owned co-op plans could have trouble repaying federal startup loans.

Daniel Levinson, the inspector general of the U.S. Department of Health and Human Services, makes that case in a report on efforts by the Centers for Medicare & Medicaid Services to set up the Consumer Operated and Oriented Plan Program.

The drafters of the Patient Protection and Affordable Care Act provided $6 billion in co-cop startup loan funding, in the hope of creating a new type of carrier that could increase the level of competition in the commercial health insurance market, especially in communities in which one or two carriers provide most of the commercial coverage.

Congress cut co-op startup funding back to about $2 billion in the American Taxpayer Relief Act of 2012. Co-op organizers in 24 states now owe CMS a total of $1.98 billion, Levinson wrote in his co-op report.

Officials at the HHS Office of Inspector General looked at 16 co-ops with organization efforts that received their startup loans from CMS by June 22, 2012.

Inspectors found that 11 of the co-ops originally expected more atart-up funds than CMS lent them, and funding from private sources appeared scarce.

PPACA lets private donations and other private organizations provide grants or loans for co-ops, but prohibits carriers from financing them, and bans investors or member-owners from ever selling the co-ops.

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