ACA CO-OP regulations announced: The key to choice and competition or too small to succeed?

July 29, 2011

Consumers and small businesses may soon be able to find affordable coverage via the new Affordable Care Act (ACA) program called the Consumer Oriented and Operated Plan (CO-OP). At least that is the hope as the U.S. Department of Health and Human Services (HHS) recently unveiled regulations for the new program.

Established by the ACA, the CO-OPs are defined as member-governed, non-profit organizations that are consumer focused and accountable to their members. In addition, profits must be utilized to reduce premiums or to improve benefits and/or the quality of care provided to members. The ACA has allocated $3.8 billion in funding for repayable loans to help qualifying insurers with start-up and capitalization costs. These interest-bearing loans “will only be made to private, non-profit entities that demonstrate a high probability of becoming financially viable,” stated a recent HHS/CMS press release.

Leading up to the passage of the ACA there were concerns that individuals and small groups lacked sufficient choice in the private insurance market. Proponents pushed for alternative sources of coverage, including the public insurance option, which they felt would provide greater choice and competition.

Instead of the highly controversial “public option” the ACA included the Consumer Operated and Oriented Plan program to develop state or regional health insurance plans that would be run by consumers and be accountable to their members instead of investors. While opponents argued that health plans run by consumers would lack the scope and leverage of the public option, policy makers included the CO-OP program to provide the competition they felt was lacking.

Opinions differ on the viability of the CO-OPs, with critics predicting that most of them will be too small to succeed and will end up defaulting on their loans. Others point out that restricting membership to individuals and small businesses will increase the risk assumed by these small companies, making it more likely they’ll fail. Proponents claim that CO-OPs are a partial antidote to the highly concentrated health insurance market in this country, where two or three for-profit insurance companies account for more than 65% of the market in most states.

To learn more visit:
Kaiser Health News

Visit Extend Health — the nation’s largest private Medicare exchange.

One Response to “ACA CO-OP regulations announced: The key to choice and competition or too small to succeed?”

  1. […] The Centers for Medicare and Medicaid Services (CMS) recently announced that seven Consumer Operated and Oriented Plans (CO-OPs) had been chosen to receive loans to create “private non-profit, consumer-governed health insurance companies.” The co-op program was created as an alternative to the government-run public option and included in the ACA to provide competition policy makers felt was lacking. […]

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