Seven CO-OPs to get funding – will they increase competition and drive down premiums?

February 24, 2012

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.

Proponents believe co-ops will give consumers and businesses more choice, and the increased competition will drive premiums down and improve the quality of health care. Scheduled to begin operation in 2014, they will be available on state-run health exchanges and will primarily serve people under 65 in the individual and small-group insurance markets.

A total of $639 million in low-interest federal loans will go to these first seven co-ops. They will operate in eight states, but the program’s goal is to eventually have at least one co-op in every state.  The loans must be paid back over five years, and the money can only be used to cover start-up costs. Additional funding will be awarded to make sure plans have enough cash to cover unexpected claims.

Skeptics don’t believe the co-ops will be able to compete with large, established insurance companies. They doubt they’ll attract enough patients to gain the market clout needed to bring health care costs down. However, an impressive number of credible organizations are interested in starting co-ops. Some of the startups are expected to fail, and the government predicts the default rate on the loans will be nearly 40%. But proponents say the competition is needed and the program will be worth it, even if there are a few casualties initially.

Related stories:

http://www.kaiserhealthnews.org/Stories/2012/February/21/health-coop-cooperatives-federal-loans.aspx

http://thehill.com/blogs/healthwatch/health-reform-implementation/211803-obama-administration-announces-first-health-law-loans-to-nonprofit-insurance-co-ops

http://www.kaiserhealthnews.org/Daily-Reports/2012/February/22/health-insurance-co-ops.aspx

CMS Press Release 

CMS Fact Sheet

One Response to “Seven CO-OPs to get funding – will they increase competition and drive down premiums?”

  1. John & Margery Shannon said

    Here is another instance of our tax money wasted on liberal ideas that will not work. We need more companies like Extend Health to help us find our way through government regulations and conditions and make the right chose.
    We really need programs that are simple, comprehensive, and understandable. These programs aught include all government employees, and elected personal. One program for all.

    JS
    Plainfield IL

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