Feds Start Preparing for Co-Op Health Plans

January 26, 2011 -- A national public option may have died, but before Congress passed the Affordable Care Act last March, lawmakers included a provision that calls for consumer-operated healthcare plans – known as co-operatives.

In fact, $6 billion in grants and loans will be available starting in 2014 to help jump start these co-ops. Existing health insurers aren’t eligible for these dollars.

Although the regulatory process hasn’t begun, the Co-Op Advisory Board held its first meeting January 13 and heard testimony from healthcare heavyweights, including representatives from existing health co-ops and the co-operative business industry. Until regulations are in place, everyone’s waiting to know the details about how they’re structured.   

 “My advice would be that groups start to network,” Paul Hazen, director of the National Co-op Business Association in Washington D.C., told The Lund Report.  “Until the regulations come out, it's going to be difficult for groups to put together anything of substance.”

The Affordable Care Act, however, did include a few requirements. Co-ops must be non-profit entities, run in individual states and organized similar to existing consumer-owned insurance companies. No where does it say how co-ops must be governed and if they must be consumer-owned.

"NCBA actively worked with Senator Conrad (D-N.D.) and others to ensure that any use of the term cooperative or co-op meant that real co-operatives would need to be established,” he told the board. “The Consumer Operated and Oriented Plan that is part of the current legislation does not contain that requirement. We continue to believe and advocate that these co-operatives can and should be incorporated under state co-operative statutes, not non-profit statutes, and, if a technical corrections bill does move forward, we will advocate that position strongly."

Healthcare advocates around the country have begun talking about what a co-operative health plan might look like.

“I think there's a lot of groups that are taking a look at this, but they're under the radar screen,” said Hazen said, who called the funding issue a “chicken-egg problem” since existing insurance companies cannot participate, while non-profits will have to find a way to get up and running so they can qualify for funding in 2014.

“The entities that would be created would be nonprofit organizations controlled by users, but not owned by them, similar to a mutual insurance company,” Hazen said.
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Preliminary discussions have occurred in Oregon about how to set up a co-op that’s efficient, effective, high quality and patient centered, according to Liz Baxter, executive director of The Archimedes Movement, which advocates for healthcare reform and civic engagement. The Oregon Health Authority is already working on plans for a state-based public option.
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“I look at the co-op as a hybrid between the traditional business model and the oh-my-gosh-we-want-to-do-good model,” she said. “It's going to have to establish itself as being on par with the best insurers in Oregon.”

Overcoming the stigma attached to publicly-owned plans – and distinguishing the new plans from a high-risk pool – will be one of the biggest hurdles that co-operatives face when they start offering insurance to the public, Baxter said. “If we want them to do well, they can't look like a social service organization.”

Money for the co-ops will be available starting in 2014 but not after 2019 when the window for grant and loan applications will close. The act also stipulates that loans must be repaid within five years and grants within 15 years.

The advisory committee intends to hold another meeting to consider regulations and accept public comment, said Bennett Blodgett, a spokesperson for the federal Department of Health and Human Services. “The operating principle is to get this done as quickly and carefully as possible to make sure the co-op folks have the information they need to start setting up a co-op.’

For More Information

To learn more about the work of the advisory committee organized by the Department of Health and Human Services, click here.
 
More information about the advisory committee, including the testimony from the January 13 meeting, can be found here.

To learn more about the National Co-op Business Association, click here.