The Centers for Medicare & Medicaid Services (CMS) has included a health plan salvage provision for Consumer Operated and Oriented Plan carriers in the new Affordable Care Act system framework regulations for 2018.

CMS says it will let a failed CO-OP transfer its enrollees’ policies to another issuer through a sale or other transaction.

CMS says it also will let companies or foundations that invest in a CO-OP or lend money to a CO-OP put representatives on the CO-OP’s board.

One of the major beneficiaries of the provision could be Baltimore-based Evergreen Health Inc. Managers of that CO-OP have said they have a deal in place and need CMS permission to restructure the company’s operations under a more flexible for-profit charter.

Related: Maryland CO-OP withdraws from 2017 individual health market

Drafters of the ACA created up the CO-OP program in an effort to increase competition in the health insurance market, by providing startup loans for nonprofit, member-owned carriers.

The Democratic senators who championed the CO-OP program left the Senate soon after CMS began setting up the loan program, and the CO-OPs became political orphans in Washington.

Republicans slashed the available funding. The Obama administration responded to traditional health insurers’ concerns about competition from CO-OPs by putting tight limits on how the CO-OPs could use their loan money.

CMS also created rules that kept CO-OPs from getting loans or investment money from any sources other than CMS. CO-OPs are also prohibited from selling their operations or converting to for-profit charters. That kept the CO-OPs from using their assets as loan collateral.

CMS also prohibited CO-OPs from making people other than their own members voting directors. That interfered with CO-OPs’ efforts to get grants and loans.

The new framework regulation makes the plan sale provision available only to failed CO-OPs. All remaining CO-OPs can use the looser board membership rules.

“We made this change in response to program experience demonstrating that the inability to grant designated board positions to prospective partners or investors may create obstacles to potentially favorable business arrangements for CO-OPs,” CMS officials say in a comment on the changes.

CMS also said that it will ease up on enforcing a requirement that a CO-OP get at least two-thirds of its revenue from the sale of individual and small-group policies. CMS will still make that the goal over time, but it will not punish that CO-OP, by demanding immediate loan repayment, if a CO-OP violates that standard in a given year but shows how it believes it can meet the standard in the future, officials say. 

Related:

Maryland ACA CO-OP to seek shift to for-profit status

CMS posts 2017 PPACA World rules

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