The remaining Consumer Operated and Oriented Plan (CO-OP) carriers need to do what they can to save themselves, and they could also use some help from federal regulators.
Andy Slavitt, the acting administrator of the Centers for Medicare & Medicaid Services (CMS), the arm of the U.S. Department of Health and Human Services (HHS) in charge of the CO-OPs, delivered that message today at a hearing organized by the Senate Finance Committee.
The committee held the hearing to look at federal oversight over the CO-OP program.
Drafters of the Patient Protection and Affordable Care Act (PPACA) provided the CO-OP startup loan funding in an effort to increase competition in the private health insurance market by creating a new breed of nonprofit, member-owned insurers. One of the most visible advocates of the CO-OP concept was Max Baucus, who, when PPACA was being shaped, was chairman of the Finance Committee.
Since October 2013, when the CO-OPs opened their doors, 12 have shut down, or started the process of shutting down.
“The remaining 11 CO-OPs, serving 13 states, are being monitored closely,” Slavitt said.
Slavitt, a former UnitedHealth Group Inc. (NYSE:UNH) executive, noted that CMS made the decisions about the CO-OP program rules and loan applications before he came aboard, in July 2015.
Sen. Charles Grassley, R-Iowa, a current member of the committee, said he represents one of the two home states of the first CO-OPs to shut down, CoOportunity.
“By any objective standard, CMS has failed in overseeing the CO-OP program,” Grassley said.
Slavitt told Grassley that the CoOportunity situation “turned out to be a very important shaping event” in how CMS officials see CO-OP risk.
CoOportunity went from looking healthy one quarter to looking sick two quarters later, Slavitt said.
For a sampling of other things Slavitt said about the CO-OP situation, read on.
1. Slavitt wants to ease the rules that have kept CO-OPs from raising capital.
In the past, HHS has interpreted the PPACA CO-OP provision to mean that a CO-OP cannot have any health insurance company executives on its board; cannot be owned even by a nonprofit, member-owned health insurer created before the PPACA CO-OP program came to life; and cannot ever sell any of its assets.
In practice, the prohibition on the sale of CO-OP assets has kept CO-OPs from using their assets as loan collateral.
“We need to make it easier for CO-OPs to attract outside capital, or a merger partner,” Slavitt testified. ”I want to loosen up the capital rules so we can lengthen the runway.”