The Internal Revenue Service (IRS) says the U.S. Department of Health and Human Services (HHS) is in charge of verifying whether the organizers of a Consumer Operated and Oriented Plan (CO-OP) health insurer have the means to pay claims.
The IRS, and arm of the U.S. Treasury Department, has declined to include a requirement that CO-OP insurer organizers affirm that the insurer will meet state solvency and state licensing standards when the organizers ask the IRS to recognize the insurer as a 501(c)(29) organization.
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The IRS talks about that decision in the preamble to the final regulations governing the 501(c)(29) organization recognition process. The final regulations — which replace temporary regulations issued in February 2012 — are set to appear in the Federal Register Thursday.
The IRS can issue temporary regulations, or regulations developed without going through the usual public comment process, when emergencies or urgent statutory deadlines lead to pressure for fast action. Temporary IRS regulations are supposed to expire after three years.
The drafters of the Patient Protection and Affordable Care Act created the CO-OP program in an effort to create a new, nonprofit, member-owned class of health insurers that would sell coverage through the PPACA public exchange system and increase the level of competition in the commercial health insurance market. PPACA authorized HHS to provide billions of dollars in CO-OP startup loans. Congress abruptly cut the amount of CO-OP funding HHS could provide in a bill that was signed into law in January 2013.
PPACA refers to a CO-OP as a “qualified nonprofit health insurance issuer” (QNHII). Organizers of a QNHII can apply for tax-exempt status under Internal Revenue Code (IRC) Section 501(c)(29).
The new final regulations deal with the process CO-OP insurer organizers must go through to get 501(c)(29) status for the insurer.