Loan Provided for CO-OP Health Insurer to be Created in Utah

Utah has been added to the list of states provided with a loan from CMS to set up a Consumer Operated and Oriented Plan (CO-OP), a new private nonprofit health insurer.  CMS Acting Administrator Marilyn Tavenner explained in the press release that “[t]hese new private nonprofit insurers will be run by consumers and are designed to offer individuals and small businesses more affordable, consumer-friendly and high-quality health insurance options.”  She touts that “CO-OPs will promote competition and give consumers more health insurance choices.” The recent awardee in Utah is Aarches Community Health Care, which received an $85 million loan from CMS.

The Patient Protection and Affordable Care Act (P.L. 111-148) contained a provision requiring the HHS Secretary to establish a so-called CO-OP program, to provide for the creation of qualified nonprofit health insurance issuers to offer qualified health plans in the individual and small group markets in states in which they are licensed.  Under the CO-OP program, those people applying to become an issuer may be provided with loans to help with start-up costs and grants to assist with solvency requirements that the states may have.  The issuer must meet the definition of a “qualified nonprofit health insurance issuer,” meaning that it (1) must be organized with the state as a nonprofit, member corporation; (2) must follow the state laws that apply to other issuers follow; (3) cannot be sponsored by a state or local government; (4) may not have offered insurance on or before July 16, 2009, or be related to an entity that existed prior to that time; (5) must incorporate conflict of interest and ethical standards to protect from “involvement and interference” of the insurance industry; and (6) must use any profits realized to lower premiums, improve benefits, and to fund programs meant to improve the qualify of health care for members. CO-OPs must also have at least half of its board of directors made up of members, with all directors elected by a majority vote of members.

Loan awardees are chosen based on a competitive basis, announced on a rolling basis.  Decisions regarding loans are made under external independent review by a multi-disciplinary team, and the loans are made only to those organizations that show a high probability of financial viability. Applications deadlines have thus far been on a quarterly basis.

To date, 17 organizations have been provided with loans to start-up CO-OPs, in various states (and sometimes spanning two states).  Along with Utah, the following states also have a CO-OP: Arizona, Connecticut, Iowa/Nebraska, Kentucky, Maine, Montana, Michigan, Nevada, New Jersey, New Mexico, New York, Oregon (with 2 CO-OPs), South Carolina, Vermont, and Wisconsin. The sum of the loans provided to these organizations is in excess of $1.3 billion.  The CO-OPs will also be able to offer health plans through Affordable Insurance Exchanges starting January 1, 2014.