History Lesson: Consumer Operated and Oriented Plans - CO-OP's (Part 1)

Alternative to Public Option?

Consumer Operated and Oriented Plans (CO-OP's) were included in Obamacare as an alternative to private health plans that are being offered to individuals and employer sponsored plans. These are start up insurance companies funded with taxpayer money that was set aside in the law. Each state was to have at least one or two of these not-for profit operations that would keep "profit mongering" private health insurance companies from paying extreme salaries to executives and huge dividends to wealthy investors. (Never mind MLR, although that's a completely different post)

Originally $10 billion was to be included for CO-OP's and it was going to be in the form of grants. That was in early 2009. By the time the law passed funding was cut to $6 billion and was now in the form of very low interest loans. These loans have very tight repayment measures and strict requirements on what CO-OP's can use the money for.

White House Intervention

In April of 2011 during budget negotiations - and amid concerns around Solyndra type loans - the White House caved on CO-OP funding and it was cut again by a little over $2 billion. Even more worrisome was a report from HHS in July of 2011 stating that roughly $1.4 billion of the remaining loan money would not be paid back. The last straw for funding was "The Fiscal Cliff" deal. To come to an agreement the White House agreed to eliminate all of the remaining funding for CO-OP's with the exception of a small contingency fund. They also agreed that they wouldn't take funding from any other sources to continue CO-OPs.

The results

In total Obamacare was able to distribute close to $2 billion dollars in loans before remaining funding was eliminated. The money was able to fund 24 CO-OP's in 23 states but around 40 additional applications were scrapped.

One CO-OP never got off the ground (Vermont went belly up at a cost to taxpayers of $4.5 million) and several others were either so far behind in the approval process that they weren't able to meet deadlines to sell plans in 2014 or are considered to be in financial trouble.

What is the current status of CO-OP's and how are they accommodating to the ever changing rules of Obamacare? In part 2 I'll share one CO-OP's response and initial game plan they have to enter the Ohio insurance market.