Small Businesses Catch a Big Break with New Insurance Co-Ops, Courtesy of Feds

Seven consumer operated and oriented insurance plans (CO-OPs) will receive repayable loans to help them establish private non-profit, consumer-governed health insurance companies, according to a recent release by CMS. Created by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148), and set to become available in January 2014, these CO-OP plans will provide consumers and small businesses more health insurance choices at affordable prices.

CO-OPs are consumer-directed organizations which are designed to be accountable to their members and responsive to the specific health care needs of those plan members by using profits to lower premiums, improve quality, and expand benefits or enrollment. According to CMS, the CO-OP loans will support the development of new innovative health insurers, promoting competition and increasing choice in the insurance market. 

“We are excited to support the health insurance CO-OPs,” said Marilyn Tavenner, Acting Administrator of the Center for Medicare and Medicaid Services (CMS).  “CO-OPs will promote competition in the insurance market and respond well to the health care needs of Americans.”

Small business owners may finally have an affordable option to provide their workers with health insurance. USA Today reported that some individuals and small business owners helping with the formation of the cooperatives said they believe the new operations will help reduce one of their most worrisome costs. “Every year it’s a challenge,” said Tom Murphy, who employs eight people at Door Systems of Montana. “Every year for the last four, five or six years, it seems like we have had to decrease benefits to our employees due to rising costs in the health care system.”

To date, a total of seven non-profits offering coverage in eight states have been awarded $638,677,300, and all CO-OP loans must be repaid with interest. Per CMS, the loans will only be made to private, nonprofit entities that demonstrate a high probability of becoming financially viable. CO-OPs will be closely monitored by CMS to ensure they are meeting program milestones, with certain funds becoming available incrementally as these milestones are met. To ensure strong financial management, CO-OPs are required to submit quarterly financial statements, including cash flow and enrollment data, receive site visits, and undergo annual external audits. According to CMS, this monitoring is concurrent with the financial and operational oversight of state insurance regulators.

Extensive provisions have been built into the program to protect against fraud, waste, and abuse. CO-OP applicants underwent background checks that included public records searches at the local, state, and national levels as well as searches of federal debarment databases. CMS maintains that loan recipients will be subject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period, plus 10 years.

All CO-OPs receiving loans were selected on a competitive basis through external and independent expert objective reviews and approval by CMS officials with private insurance expertise. Non-profits receiving the loans include: Freelancers CO-OP of Oregon, New Mexico Health Connections, Montana Health Cooperative, Midwest Members Health, Common Ground Healthcare Cooperative, Freelancers CO-OP of New Jersey, and Freelancers Health Service Corporation. Starting in 2014, these CO-OPs will operate in Oregon, New Mexico, Montana, Iowa, Nebraska, Wisconsin, New Jersey, and New York.

These non-profits represent the first round of awards from applications due on October 17, 2011. A second round of applications was due on January 3, 2012, and CMS plans to offer subsequent quarterly application deadlines through December 31, 2012. Awards will be announced on a rolling basis, per CMS, which also stated that it is still reviewing applications from the October 17th due date, and additional awards from applications received in or after October will be announced as they are finalized.