Frequently Asked Questions
About CoOportunity Health
What is a Health Insurance CO-OP?
The Patient Protection and Affordable Care Act—often just called the Affordable Care Act or ACA—passed into law in March 2010 provided seed money to fund health insurance cooperatives in all 50 states. Section 1322 of the ACA requires that a health cooperative, known as a “Consumer Operated and Oriented Plan” (CO-OP) is formed as a non-profit, controlled by and operated on behalf of its members.
A CO-OP is a new type of non-profit health insurer that is directed by its customers, uses profits for customers’ benefit, and is designed to offer individuals and small businesses affordable, customer-friendly, and high-quality health insurance options. CO-OPs may operate locally, statewide, or in multiple states. CO-OPs must be licensed as issuers in each state in which they operate and are subject to state laws and regulations that apply to all similarly-situated issuers.
What types of organizations can become a CO-OP?
The CO-OP Program Final Rule released by HHS on December 8, 2011, clarifies the types of organizations eligible to apply for CO-OP loans:
- Organizations sponsored by pre-existing issuers, holding companies that control pre-existing issuers, and foundations established by pre-existing issuers are not eligible for loans under the CO-OP program.
- An organization is ineligible for the CO-OP program if it receives 25 percent or more of its total funding (excluding any loans received from the CO-OP Program) from pre-existing issuers and their agents.
- A CO-OP sponsor or applicant may receive grants and other funding from a State or local government as long as the CO-OP or its sponsor is not controlled by a governmental entity and the CO-OP does not receive more than 40 percent of its total funding from a State or local government.
- CO-OPs that will operate in multiple States may establish a State of domicile for licensure and file expansion applications to HHS.
What is the corporate structure of Health Insurance CO-OPs?
A CO-OP Insurance Plan is a non-profit insurance company operated by its members for their mutual benefit. CO-OP members will form a majority of the board of directors no later than two years after it becomes operational, ensuring that a CO-OP will always meet the needs of the people it serves.
What are the licensing requirements for Health Insurance CO-OPs?
CO-OPs must meet the same state requirements as all other health insurance issuers. CO-OPs are responsible for working with the relevant state Departments of Insurance or licensing agencies to achieve licensure. CO-OPs, like all other health insurers, will also have to comply with federal or state-based Affordable Insurance Exchange rules.
Is a Health Insurance CO-OP the same thing as a “cooperative”?
- While the newly-established Health Insurance CO-OP concept was modeled after “cooperatives,” they are different in several ways, primarily because other cooperatives are not set up to provide insurance offerings and the risk associated with them.
- In the United States, there are over 29,000 cooperatives employing 2 million people with over $652 billion in annual revenue.
- Cooperatives have been extremely successful in rural states, like Iowa and Nebraska, in various industries: agriculture, utilities, grocery, housing, and credit unions.
How will Health Insurance CO-OPs address the rising costs of healthcare?
The Affordable Care Act sets out several ways that CO-OPs can address cost:
- Drive cost savings through value-based healthcare approaches. These include prevention, disease management, screening, appropriate pharmacy benefits, and use of high-value providers.
- Enhance competition in the newly-created Affordable Insurance Exchanges by providing additional plan choices for consumers and businesses. This will be especially important in areas currently dominated by one or only a few insurance companies.
- Provide and promote greater primary care access and care coordination for its members to improve the cost and quality of care.
How did CO-OPs begin?
- As part of the health reform debate and an alternative to a national “public option” plan, Senator Kent Conrad (D-ND) proposed forming non-profit health insurance cooperatives to provide health insurance coverage at low cost and to provide additional choice for health insurance needs.
- The Affordable Care Act (Section 1322) created CO-OPs, or Consumer Operated and Oriented Plans, to foster the creation of new consumer-governed, non-profit health plans.
- CO-OPs will provide health insurance to individuals and small employers as part of the Competitive Health Insurance Marketplace (also known as Affordable Insurance Exchange or simply, the “Exchange”) in 2014. CO-OPs will offer products both inside and outside of the Exchanges anticipated to be available in Iowa and Nebraska. Large groups can also participate. Unlike traditional insurance, any profits will be used to either lower premiums, to improve benefits, or to pay back the federal government loans.
- To encourage the establishment of a CO-OP in each state, the program provides $3.4 billion in loans, not grants, to capitalize eligible prospective CO-OPs through Start-up Loans and Solvency Loans to eligible non-profit organizations.
Why does America need Health Insurance CO-OPs?
There is widespread consensus that the current for-profit system is broken and in need of repair. Member ownership and governance (cooperatives) have worked to serve millions of working families with electricity, telephone service, food and farm services, and financial services (credit unions are cooperative entities).
Established health cooperatives in Washington, Wisconsin, Minnesota, and elsewhere have a proven track record of delivering value and quality. In most states, a lack of real competition hampers consumers in the purchase of health insurance. In fact, little competition has proven to drive prices up. Member-owned cooperatives will bring fresh alternatives to a fragmented healthcare system.
Explain the federal funding that is available for CO-OPs.
The CO-OP loan program has a one-time, $3.4 billion federal appropriation to support loans. Non-profit organizations may apply for two types of low-interest loans:
Start-up Loans: Funding to assist with the start-up activities associated with developing a CO-OP.
Solvency Loans: Funding to assist with state-established reserve requirements.
Start-up loans must be repaid in five years and Solvency loans must be repaid, with interest, in 15 years from the date of disbursement.
The CO-OP program contains extensive provisions to protect against fraud, waste, and abuse. Loan recipients are subject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period plus 10 years. Recipients will submit semi-annual program reports and quarterly financial statements. Additionally, the Center of Medicare and Medicaid (CMS) will conduct audits, including site visits, as appropriate. CO-OPs must meet a series of milestones as laid out in their loan agreements before drawing down any money from the program.
Why do Iowa and Nebraska need a Health Insurance CO-OP?
Individuals, businesses and, particularly small companies in our two states currently do not have many options regarding health insurance. Both states are considered “concentrated” insurance markets, meaning that one or two large health insurance carriers dominate the majority of the market. This is a particularly big problem in states like ours where the economy is fueled by small businesses that have very little say in the health insurance market. The result is increasing numbers of people either going without health coverage or who are at increasing risk of being without coverage. The introduction of CO-OPs like CoOportunity Health will provide an alternative option for individuals and small businesses that will diversify the marketplace, increase competition, and provide more choice.
About CoOportunity Health
How many people does CoOportunity Health plan on covering?
We would like to cover as many as possible, of course, and plan to offer a competitive product portfolio for individuals and small businesses. We have set modest target of serving nearly 50,000 members in our target market states of Iowa and Nebraska within five years of operation. We believe we can exceed this goal while becoming a competitive alternative provider of health insurance benefits in Iowa and Nebraska.
When will you start selling plans?
CoOportunity Health will begin marketing our products and services no later than October 2013 with effective dates for coverage beginning January 1, 2014.
How much will premiums be?
- This hasn’t been determined yet, but we were awarded the loan based on our ability to be competitive with existing insurers, and we fully expect to offer a high-quality product at a competitive price.
- We hope to provide low-cost, high-quality health insurance through a combination of low administrative costs, outstanding care management, and an increased emphasis on wellness, prevention, and improved primary care access.
What advantages does CoOportunity Health have?
- We believe there are many. For one, we are starting with a blank slate and can design plans based on what will be best for our customers as defined by them. This gives us the opportunity to implement some proven and innovative practices that traditional insurers may not be using.
- As opposed to a for-profit insurance company, any savings we encounter will be applied towards reduced cost or expanded benefits for our customers. Since our governance is member-controlled, the consumer will have much more say in how we operate the CO-OP. We believe this will result in insurance plans better tailored to meet the needs of Iowans and Nebraskans.
What makes CoOportunity Health different than the private health insurance industry?
CoOportunity Health is a member-centered, non-profit health insurance CO-OP, available for the first time in Iowa and Nebraska. Unlike other mutual insurance companies which say they are owned by policyholders, CoOportunity Health will actively involve its members in the election of its Board of Directors, key committees, and in its operations. The governing board will include a majority of CO-OP members/enrollees and will oversee the company. In addition, CoOportunity Health will focus on prevention and health; must comply with all state regulations; must be governed with consumer control; and any profits must go towards reducing premiums and improving benefits.
Will CoOportunity Health participate in the new Affordable Insurance Exchanges currently being established in Iowa and Nebraska?
Yes. CoOportunity Health must offer health insurance options through the state-regulated Affordable Insurance Exchanges in Iowa and Nebraska. If state Exchanges are unavailable, we will participate in the federal Exchange. Benefit structures offered by CoOportunity Health must comply with all essential benefits and regulations defined by state and federal law. We will also market health insurance products outside of Exchanges through select agents and brokers.
Is CoOportunity Health a government-run program?
Absolutely not. CoOportunity Health is an independent, non-profit organization operated and governed by its members. The organization received start-up funding from government loans, all of which must be repaid.
How will consumers get on your Board of Directors?
As soon as CoOportunity Health begins operation, it will be required to encourage our plan members to consider election to the Board of Directors. The majority of our Board will need to be members that are enrolled in our plans, within two years of operations. We can have a minority of experts on the Board who will lend their expertise in a variety of areas, all of whom must be elected by the members.
What are some of biggest tasks ahead for the organization?
- CoOportunity Health must begin marketing and enrolling customers no later than October 2013.
- The effective date (start date) for insurance coverage must be January 1, 2014, when the Affordable Insurance Exchanges are scheduled to be operational in Iowa and Nebraska.
- For the remainder of 2012 and most of 2013, we will be operating in “start-up mode,” working to establish key functions and capabilities of the company, including product development, distribution channel strategy, and operational readiness in collaboration with our strategic partners.
- CoOportunity Health has contracted with HealthPartners, an established health system, administrator and insurer in Minnesota, to provide operational functions for the company such as membership enrollment and eligibility management, claims administration, customer service, and medical management.
- CoOportunity Health has also contracted with Midlands Choice, an established hospital-owned provider network organization, to provide network administration and management capabilities as an underpinning for all health plan offerings.
Will CoOportunity Health serve rural areas of Iowa and Nebraska?
Absolutely. CoOportunity Health plans to market its products and services across the states of Iowa and Nebraska with a focus on individuals, families, small businesses and other employers. It will work closely with organizations similarly organized, such as cooperatives and credit unions, which have a large concentration of members in rural areas.
Will CoOportunity Health work with Medicare and Medicaid?
CoOportunity Health’s primary focus is providing alternative health insurance solutions for individuals, families and employers—particularly small businesses. These constituencies account for the highest percentage of uninsured population in the states of Iowa and Nebraska. There are likely synergies and opportunities to provide coverage options for individuals losing Medicaid coverage as well. We do not plan to enter the Medicare market at this time.
What role will physicians and providers have in CoOportunity Health?
We have already had discussions with provider groups and physicians who are interested in innovative reimbursement strategies and delivery services in ways that match their community needs. We believe providers know what will work to keep their patients healthy, and we plan to invest in the health of our members. We will be flexible in our approach and responsive to ideas that providers have – including medical homes, integrated care, accountable care organizations, and other innovations that will improve quality and maximize value.