Officials at the Centers for Medicare & Medicaid Services (CMS) have confirmed that they are trying to figure out what they can get in investor cash moving into the Consumer Operated and Oriented Plan (CO-OP) carriers.
CMS looks at CO-OP management regulations in a short batch of answers to CO-OP questions that was posted on its website this week.
Drafters of the Patient Protection and Affordable Care Act (PPACA) set up a CO-OP startup loan program in an effort to get nonprofit, member-owned carriers competing with traditional health carriers. CMS and its parent, the U.S. Department of Health and Human Services (HHS), tried to maximize the independence of the CO-OPs by forbidding the CO-OPs from having any representative from a health insurer, or from state government, on its board.
See also: PPACA: HHS Drafts CO-OP Regs
In the new document, CMS officials present the following question: “Can CMS waive or change the requirements for serving on a CO-OP board, which could help CO-OPs diversify board membership?”
CMS officials explained that, “CMS is exploring what changes could be made to help CO-OPs diversify their boards and grow and raise capital, while still preserving the fundamentally member-run nature of the CO-OP program.”
In the same batch of answers, CMS also respond to questions about decisions CMS made in 2015 to let some CO-OPs raise capital by using PPACA start-up loans as surplus notes, or instruments that could be used as loan collateral.
CMS officials say the CO-OP program provided two types of financing: startup loans and solvency loans.
The loan terms require a CO-OP to treat a startup loan as a general obligation and pay it back at a specific time.
The loan terms require a CO-OP to pay back the solvency loans only when a state insurance commissioner determines that repayment will not hurt the CO-OP. Because the solvency loan has no definite repayment date, CMS has always treated the solvency loans as surplus notes, officials say.
If a creditor does accept a surplus note as collateral, “the debt becomes comprehensively subordinate” to obligations to other creditors, officials say.
If a CO-OP that used a surplus note as collateral fails, the claims of policyholders, beneficiaries, and all other classes of creditors other than other surplus note holders come before the claims of the surplus note holder, officials say.
“The debt cannot be repaid, and interest cannot accrue, without the prior written approval of the state insurance commissioner,” officials say.
Have you followed us on Facebook?