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CO-OP program: Watchdog agency takes a sniff

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Three of the 23 Consumer Operated and Oriented Plan (CO-OP) insurers have maxed out their Patient Protection and Affordable Care Act (PPACA) solvency loan accounts.

But 20 of the CO-OPs still have untapped solvency credit reserves.

Officials at the U.S. Government Accountability Office (GAO), a congressional watchdog agency, have included that finding in a summary of a CO-OP program review prepared at the request of four Republican senators.

Vijay A. D’Souza, a GAO director, writes in the report that the Centers for Medicare & Medicaid Services (CMS), the arm of the U.S. Department of Health and Human Services (HHS) responsible for setting up and running the CO-OP program, has issued about $1.6 billion of the $2.4 billion in available CO-OP funding, including $351 million of 358 million in startup funding and about $1.2 billion of the $2.1 billion in solvency funding.

See also: Court issues CoOportunity liquidation order

PPACA drafters added the CO-OP provision in an effort to create nonprofit, member-owned health insurers that would increase the level of competition in the commercial health insurance market. The drafters authorized HHS to provide startup loans and loans the insurers could use to beef up capital and surplus levels during their early years.

CMS has allocated the CO-OP funding on a plan-by-plan basis. 

The CO-OPs in Kentucky and Maine still have more than 10 percent of their startup loan money left over.

Thirteen of the CO-OPs have used up less than 60 percent of the available solvency money. 

Five CO-OPs — in Wisconsin Arizona, Oregon, New Mexico, Nevada and Louisiana — have used 60 percent to 90 percent of the solvency money.

The CO-OP in Colorado has used 92 percent of its $57.1 million solvency funding allocation.

Three CO-OPs have used up all available solvency funding. 

CoOportunity Health, a company that once operated in Iowa and Nebraska, used all of its $130.6 million solvency allocation, before entering liquidation.

Kentucky Health Cooperative Inc. has used 100 percent of $124.5 million in solvency loans, and HealthCT of Connecticut has used 100 percent of $107 million in solvency loans, according to the GAO.

A CO-OP may use a high percentage of solvency funding either because enrollees have filed more claims than expected or because of rapid enrollment growth, D’Souza writes.

See also: IRS: HHS sets CO-OP solvency rules

The GAO also looked into allegations that some CO-OPs may have gotten into trouble by charging much lower premiums than competitors.

The GAO investigators analyzed premium competitiveness by using the average cost for all of the plans an issuer offered within a given metal level in 2014, rather than using actual enrollment in each plan option to see what issuer’s enrollees were actually paying for coverage.

But, when viewed in terms of average prices within a metal level, without any weighting for actual enrollment, about half of the CO-OPs seemed to be charging more than other issuers in their rating areas, and about half were charging less, according to the GAO.

The GAO also looked at the CO-OP organizers’ ability to project enrollment.

Five CO-OPs ended 2014 with much higher enrollment levels than projected, and 10 ended with much lower levels of enrollment than projected. Eight emerged with roughly to 50 percent to 200 percent of the level enrollment they had estimated.