CO-OP Program Update

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The Affordable Care Act established the Consumer Operated & Oriented Plan (“CO-OP”) Program.  The Program makes federal loans available to new consumer run, non-profit private health insurers in an effort to increase competition in the health insurance marketplace.  Last month HHS issued proposed rules and a funding announcement outlining the requirements of CO-OPS and the loan program.  Today HHS held a conference call to answer questions from parties interested in creating a CO-OP.  Those interested in forming a CO-OP should note the following from today’s call:

  • CO-OPs that receive federal funding cannot restrict members to a specific industry but must accept any willing applicant (for example, a trade association could not establish a CO-OP and restrict membership to association members);
  • Members of the CO-OP (who ultimately control the CO-OP) are the individuals covered by the insurance (not the employers offering the insurance);
  • CO-OPs must offer insurance in the individual market and cannot limit their business to the group market;
  • Start up costs incurred prior to the loan award are not reimbursable from loan funds; however, up to $100,000 in costs directly related to establishing the business plan and feasibility study required by the loan application are reimbursable if a loan is ultimately awarded;
  • Prior to submitting an application, the applicant must have initiated discussion regarding licensure with the applicant’s state Insurance Department but does not need to be licensed at the time the application is submitted; and
  • The first application deadline for CO-OP funding is October 17, 2011.  While applications will continue to be accepted through December 31, 2012, funding is limited and could be exhausted prior to that time.

 The proposed rule and funding announcement can be accessed at  http://cciio.cms.gov/    Interested parties who have questions about the Program can submit them to co-opprogramquestions@cms.hhs.gov   Responses will be provided in the form of Frequently Asked Questions on CMS’ website.

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