What is a health insurance CO-OP? “CO-OP” stands for Consumer Operated and Oriented Plan. The federal government included a provision in the Section 1322 of the Patient Protection and Affordable Care Act (ACA) of 2010 to provide loans for private parties to establish non-profit and consumer-based health insurance companies, with the goal of having a health insurance CO-OP in every state. These CO-OPs are now providing health insurance to individuals and small employers who now have a difficult time obtaining coverage. In some states, larger groups can also sign up. CO-OPs are public-private partnerships, and will be completely private and member-owned once the loans are repaid.
What does it mean for a CO-OP to be member-governed? CO-OPs are required by law to be governed primarily by individuals and businesses that buy insurance coverage through a CO-OP. This ensures that CO-OPs will meet the needs of the people it insures, and not those of a Board that may have profit or other primary interests. CO-OPs are currently in the process of electing member-governed boards of directors.
Is there a CO-OP in my state? There are currently 22 health insurance CO-OPs serving 23 states. To find out whether there is a CO-OP in your state,please click here. Originally, Congress allocated loan funds designed to enable a CO-OP in all 50 states. Early in 2013 year, however, loan funding for additional CO-OPs was cut as a part of a budget agreement.
What happens to profits, loan funds? The loans are for the startup and solvency of the CO-OPs. The startup loans will be repaid over 5 years from the time that the CO-OP starts providing insurance. The solvency loans, which are not designed to be spent and are used to meet state requirements for insurance company reserves, must be paid back over 15 years. Any profits CO-OPs earn must be used to either lower premiums or improve benefits.
Why now? Across the United States, the cost of health care has steadily outpaced any improvement in the economy or rise in family income. Many people and businesses can no longer afford to purchase insurance and for those who can, the price continues to climb. Small businesses are at a particular disadvantage as they pay more for health coverage than their larger counterparts. Health insurance CO-OPs are developing innovative ways of paying for health care that encourage improved value and lower costs and therefore enhance competition in the existing health insurance marketplace.
These methods include an emphasis on primary care doctors for prevention, ready access, and management of chronic illness. Complex specialty and hospital needs will be rewarded for higher quality which leads to the most cost-effective medical care. Many CO-OPs are focusing on wellness and prevention programs to lower the cost of health care for both the patient and carrier, including utilizing community health workers. Several CO-OPs are implementing a medical home model to provide comprehensive care in a more cost-efficient manner. You can learn more about CO-OPs’ innovative approaches by visiting our blog and reading some of our featured “Innovations of the Month.”
How is a CO-OP formed? After attracting the talented leadership of business people, health advocates, health policy experts and others, developing strong business plans, and making it through a rigorous application process, 23 CO-OPs in 23 states were awarded low-interest loans from the federal government totaling nearly $2 billion. Since they initially entered the Marketplaces in October of 2013, existing CO-OPs have expanded to three new states – Idaho, New Hampshire, and West Virginia (in 2016).