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Oversight blasts CO-OPs

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The House Oversight and Government Reform Committee staff claims some CO-OP plan organizers of trying to bend program rules in their favor.

The staff described the $2 billion in Patient Protection and Affordable Care Act CO-OP startup loan funding as an “Obamacare loan guarantee gamble.”

The committee unveiled the report today at a hearing.

Congress cut off CO-OP startup loan funding early, while some organizers had applications in the pipeline, but CO-OPs opened their doors in more than 20 states on Oct. 1, when enrollment started.

PPACA required the U.S. Department of Health and Human Services to lend CO-OP money only to organizers free of ties to carriers. HHS said it would back only organizers that seemed likely to start stable CO-OPs.

HHS ended up letting Freelancers Union, a New York health carrier that has a for-profit subsidiary, help organize CO-OPs in three states, the committee staff says.

Vermont financial services regulators found a CO-OP being organized in that state was shaky and poorly managed, and the CO-OP organizers then lobbied the Obama administration and state officials for permission to operate without a license, the staff says.

Sara Horowitz, executive director of Freelancers Union, told the committee that the organization has tried to be open with all, including the committee staff, and that it was uniquely qualified to sponsor CO-OPs because it had built a successful member-focused health insurance company.

Freelancers Union helped start CO-OPs in New York, New Jersey and Oregon, but PPACA lets for-profit insurers help start CO-OPs, as long as the carriers involved don’t end up owning or controlling the CO-OPs, Horowitz said, according to a written version of her testimony.

Other witnesses suggested constraints built into PPACA — such as a ban on CO-OPs using federal loan money for marketing — will make creating sustainable CO-OPs difficult. 

Jan VanRiper, executive director of the National Alliance of State Health Co-Ops, told the committee that many CO-OPs have reported solid early enrollment figures. The CO-OPs in Maine, Wisconsin, Iowa and Nebraska already have met their first-year enrollment goals, VanRiper said.

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