Consumer Operated and Oriented Plans insurers will provide more health plan options for individuals and small businesses, officials from the Centers for Medicare and Medicaid Services said July 18.
The new insurers "will provide consumers more choices, greater plan accountability, and help ensure a more competitive insurance market," Steve Larsen, director of the Center for Consumer Information and Insurance Oversight at CMS, said during a press briefing to announce the proposed rule on CO-OPs. He added that he hopes CO-OPs will provide affordable options for small businesses that often pay up to 18% more in health care costs than large businesses.
While health insurance plans created under the CO-OP program will have requirements similar to those of plans offered through state exchanges, CO-OP plans will be required to use any profits they make to lower premiums, improve the quality of care, or improve benefits available to consumers.
In addition, CO-OP plans will be governed by a board composed chiefly of plan members elected by their peers, and enrollees will have the opportunity to help decide the direction of health plans. CO-OPs will also be required to tailor two-thirds of their plans to serve either individuals or small businesses.
CMS will be issuing $3.8 billion in start-up and capital loans for CO-OP insurers. They will also be evaluating potential insurers for their potential financial viability, to ensure that they will be able to turn a profit.
Despite opportunity for consumer benefits, CMS is also bracing for potential costs, including default on the loans. According to the proposed rule, CMS estimates that 35% of solvency loans and 40% of start-up loans may not be repaid. The rule also states that the CMS estimates spending $600 million for start-up loans and $3.2 million for solvency loans. Start-up loans must be repaid in 5 years, and capital, or solvency, loans must be paid in 15 years. However, Mr. Larsen said those estimates are "conservative," and the actual expectation is a much lower rate of default.
"Our role in terms of due diligence and oversight and evaluation of the business plan is to make sure that the money goes out to entities that create sound business plans," Mr. Larsen said.
He added that the agency will be pushing to have a CO-OP available in every state. So far, the agency estimates 57 entities will participate in the program. Rhode Island and Texas have announced that they plan to have a CO-OP available. Existing health CO-OPs include Puget Sound Health CO-OP in Washington and the Health Partners CO-OP that operates in Wisconsin and Minnesota.
CMS will accept comments on the proposed rule for 60 days after it is officially published in the Federal Register.