The Centers for Medicare & Medicaid Services Monday awarded a loan to Michigan Consumer’s Healthcare CO-OP to launch a new private, non-profit, consumer-governed health insurance company, called a Consumer Operated and Oriented Plan. CO-OP loans are only made to private, nonprofit entities that demonstrate a high probability of financial viability. All CO-OPs receiving loans were selected by CMS on a competitive basis based on external independent review by a multi-disciplinary team.
To ensure that CO-OPs are truly new entities, the health care reform law prohibits any state-licensed health insurance company that existed on July 16, 2009 from qualifying for the program. The CO-OP program was created by the Affordable Care Act, which states that profits gained by a CO-OP must go directly back to their enrollees to be used to lower premiums, expand benefits, or improve quality. The program encourages eligible groups to create new, innovative, consumer–responsive health insurance companies to increase competition in the individual and small business markets. Beginning in 2014, CO-OPs will offer plans through the Affordable Insurance Exchanges.
As consumer-run insurers, CO-OPs will operate differently from traditional insurance companies. More than half of the Board of Directors must be customers or members of the CO-OP, and all directors must be elected by a majority vote of the members. This improves accountability and transparency.
“CO-OPs will promote competition and give consumers more health insurance choices,” said Marilyn Tavenner, CMS acting administrator. The new insurers will be run by consumers and are designed to offer individuals and small businesses more affordable, consumer-friendly, high-quality health insurance options.
CMS will closely monitor CO-OPs to ensure they are meeting program goals. To ensure strong financial management, CO-OPs are required to submit quarterly financial statements, receive site visits, and undergo annual external audits. This monitoring is concurrent with the financial and operational oversight by state insurance regulators. The CO-OPs are required to meet state and federal standards for qualified health plans to sell coverage through the Exchanges and the State’s Small Business Health Option Programs (SHOP Exchanges).
In addition to Michigan Consumer’s Healthcare CO-OP, a CO-OP loan was also awarded in Nevada to Hospitality Health CO-OP on Monday. Previously, ten organizations were awarded loans that plan to offer coverage in ten states.