Physician-sponsored health plan gets startup federal loan

The insurance company was funded under a program created by the Affordable Care Act and pledges to live on even if the act doesn’t.

By — Posted June 21, 2012

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A physician-sponsored insurer is one of the 14 consumer-owned and operated health insurance plans, or CO-OPs, starting up around the country, thanks to federal loans made available through the Affordable Care Act as a means to create more coverage options for the millions of Americans required to begin buying insurance in 2014.

HealthyCT, sponsored by the Connecticut State Medical Society and CSMS-IPA, a statewide independent practice association, received a $75.8 million loan from the U.S. Dept. of Health and Human Services, joining 13 other CO-OPs with startup funding from the government. The solvency loans are meant to help CO-OPs qualify for state licensing requirements, which often include the financial backing to cover catastrophic losses. In all, $1.5 billion has been awarded to CO-OPs in 14 states as of June.

The CO-OP program is meant to create an alternative to the health plans available before health system reform, and is seen by some as a compromise for supporters of a public option health plan. Because they are meant to help new insurers get off the ground, loans are not available to for-profit plans or any entity that operated a health insurance plan before July 2009 (link).

Some health centers and hospitals are co-sponsoring CO-OPs, but HealthyCT is the first physician-based CO-OP to be awarded a federal loan.

“CSMS sees HealthyCT as a model that may be used by other medical societies interested in exploring the CO-OP arrangement,” said Matthew Katz, executive vice president and CEO of the Connecticut State Medical Society.

CO-OPs are authorized under the Affordable Care Act, which is being reviewed by the U.S. Supreme Court. The loan paperwork already has been signed, so even if the court declares ACA unconstitutional, HealthyCT wouldn’t lose its funding unless Congress were to take action to retroactively rescind the loans. That is an unlikely scenario, said David S. Katz, MD, a general surgeon from Milford, Conn., who is board chair for HealthyCT.

Even without an individual mandate to buy health insurance under the ACA, Connecticut’s health insurance market could use a new entry, so the company’s business plan isn’t dependent on the reform bill, Dr. Katz said.

He said CSMS polled its members a few years ago and discovered they were searching for affordable health coverage for themselves and their staffs. But even with 5,600 people who said they would buy in to a plan offered by the medical society, CSMS couldn’t get a health insurer to underwrite it.

The next step for HealthyCT is licensure through the state insurance department, Dr. Katz said. The plan then can set up headquarters and hire executives and support staff and begin offering coverage. He said the HealthyCT plan probably will feature an open, PPO-style network, but will work to support the patient-centered medical home model, focused on quality and fair compensation for physicians.

“We saw it as an opportunity to change the paradigm of how health insurance is delivered,” he said. “We’re not just getting into this to be another insurance company just like all the others.”

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