Nonprofit COOP health plans get final regulations

The program is designed to provide competition with for-profit plans in health insurance exchanges, but funding cuts may limit its reach.

By Doug Trapp — Posted Dec. 29, 2011

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Although some stakeholders praised a final rule to implement new consumer-governed, nonprofit health insurance plans under the health system reform law, congressional funding cuts have increased the possibility that not every state will have one of these plans.

The Dept. of Health and Human Services on Dec. 8 released the final regulation for the Consumer Operated and Oriented Plan program. COOPs are designed to provide competition with for-profit health insurance plans in forthcoming health insurance exchanges. These plans must be governed by boards elected by plan members within a year of the plan signing up its first member.

The COOP program was created by the health reform law, which also provided $6 billion in implementation funding. The money will be used for two types of COOP loans: start-up, to be repaid in five years; and loans to help the plans meet state solvency and reserve requirements, to be repaid in 15 years.

The lack of such startup and operational funding is a key reason more states do not have health insurance cooperatives and other nonprofit health insurance plans already, according to the final HHS rule. Loan recipients are subject to monitoring, audits and other reporting requirements for 10 years after the loans are repaid.

AMA President Peter W. Carmel, MD, said the COOP program will create physician-led plans that provide patients greater opportunities to access the health care coverage they need. At least two medical societies are supporting applications to begin COOPs of their own.

The Connecticut State Medical Society in October 2011 joined the Connecticut State Medical Society Independent Practice Assn. to apply for a statewide COOP. The organizations wanted to provide a nonprofit alternative health plan in part because Connecticut residents have no such option, said Matthew Katz, executive vice president and CEO of the Connecticut State Medical Society. Its COOP will employ a medical home care delivery model.

The medical associations of Riverside County and San Bernardino County in California are working on application with the Inland Empire Foundation for Medical Care. The latter is a PPO network and a licensed third-party benefits administrator for self-funded employers, said Dolores Green, CEO of the foundation and executive director of Riverside County Medical Assn.

She said one of a health plan's most difficult tasks is to form a network of physicians and health professionals. "We at least had that piece in place."

Green and Katz said that their biggest concern about the final regulation was that it would require adjustments to their COOP applications, but it did not. The final rule did clarify that government entities are not eligible for the program.

However, Congress eliminated nearly half of the COOP program's funding in 2011. A measure Congress adopted in April to fund the federal government temporarily cut $2.2 billion from the program. The final fiscal 2012 appropriations bill further reduced the funding by $400 million, leaving it with $3.4 billion.

Katz said the cuts are disconcerting because the original intent of the COOP program was to have one plan in each state. "I don't know if you can do that with the amount of money they have left."

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