CMS Releases Proposed Rule on Not-for-Profit Health Plan Co-Ops
On Tuesday, CMS released a proposed rule governing the creation of private not-for-profit health plans created under the federal health reform law, known as co-ops, which will be funded through $3.8 billion in government loans, Modern Healthcare reports.
The co-ops, which are governed by their members, are meant to act as alternatives to for-profit plans in the new health insurance exchanges (Daly, Modern Healthcare, 7/18).
The reform law mandates that there be at least one co-op in each state (Fox, National Journal, 7/18). CMS intends to provide $600 million in loans for startup costs and $3.2 billion to help the plans stay solvent, according to the rule (Baker, "Healthwatch," The Hill, 7/18).
Richard Popper, director of the Office of Insurance Programs at CMS, said that co-ops will qualify for startup loans if CMS determines that they have a high probability of becoming financially viable (Modern Healthcare, 7/18).
However, the proposed rule estimates a 40% default rate for the planning loans and a 35% default rate for the solvency loans. Steven Larsen, director of health reform oversight at HHS, called the default figures "back-end estimate[s]" that are "for conservatism's sake" ("Healthwatch," The Hill, 7/18). He noted that loans are expected to be repaid in five years (National Journal, 7/18).
HHS officials believe that about 57 co-ops could receive funding, but they said that might not be the final number. They said that actual loan amounts are determined by the size of the plans and how much risk they will accept.
However, some insurance experts believe that the loans will not be enough to help co-ops compete against large insurers, which can hold down costs through bulk purchasing and by using their bargaining power to lower rates and draw more customers (Reichard, CQ HealthBeat, 7/18).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.