In order to explore Consumer Oriented and Operated Plans (CO-OPs) from different angles, one needs to understand how the US healthcare market operates. It constitutes of both private players and government sponsored but the majority of healthcare spending comes from Medicare, Medicaid, TRICARE, CHAP and the Veterans Health Administration. According to most, the US healthcare system is considered to be too fragmented and siloed.
However, with several healthcare reforms taking place, the future expectations are huge. One such reform by Patient Protection and Affordable Care Act (PPACA) lays emphasis on the formation of CO-OPs. It is expected that CO-OPs will come into operation from January 1, 2014, providing health plans through the competitive health exchange, supposedly required to be formed in all US states. CO-OPs can also offer health plans outside of any state health exchange.
The concept of CO-OPs is not something new. In fact, it was there in the 1930s and 1940s but this is the first time in recent times that this concept is gaining importance. Now, with the formation of CO-OPs, hospitals and physicians will also have the ability to create health plans according to their understanding and compete in common market with other market players. But, it remains to be seen how a CO-OP will gain acceptability into the market which is heavily dominated by traditional commercial health insurers.
Due to the federal government support which has sanctioned $3.8 billion as a loan, the future looks extremely challenging for CO-OPs to survive in this competitive environment.But surviving depends a lot on establishing a brand identity, figuring out how to handle claims, developing actuarial expertise, establishing reserves and above all meeting state licensing requirements and solvency requirements.
What are CO-OPs?
In layman’s term, CO-OPs are health insurance plans that aim to provide quality, affordable, consumer-friendly health insurance plans in every state. They are private and nonprofit in nature. It is considered to be as one of the most innovative cost-containment solutions in the history of US healthcare reforms. The operation of CO-OPs depends wholly on the founding fathers of that particular CO-OP. It may operate locally, State-wide or in multiple States. But they have to acquire the necessary licenses before operating in any particular geographic area and abide State laws and regulations that apply in that particular state.CO-OPs will be made available to all includingindependent workers, Americans making 400% less than the defined poverty level income, etc. In fact, insured that wishes to go out-of-network can also avail CO-OP, but out-of-network rules would work exactly like any other non-profit health insurers.
CO-OP Vs Commercial Insurance:
As defined above, a CO-OP is a private, non-profit, member-driven entity. Apart from this, other main distinguishing factors from a commercial insurance are-
- CO-OPs are mostly owned by its members, who constitute the majority of its board members.
- The basic aim of a CO-OP is to provide customer satisfaction and this is possible if transparency route is followed.
- It is also perceived that any profits/ surplus made via operation has to be used for the betterment of its members in the form of lower premiums,improved benefit design, funding quality improvement initiatives or other enhancements in the quality of care delivered.
How is a CO-OP funded?
The major hurdle witnessed by non-profitorganizations is start up cost and licensing requirements.To overcome thesebarriers, PPACA has allotted$3.8 billion for CO-Ops in the form of federal loans. These loans has two main components-one is theStart-up loans which is meant for starting a CO-OP program, which is payable in 5 years time and theother is Solvency loanswhich is meant to meet the state solvency/reserve requirements, applicableto all health insurers and are set by each state’s insurance regulators. Solvency Loanshas tobepaid back within15 years,with interestto the CMS.
CO-Ops has to follow several rules laid downby CMS i.e.it gives the CMS privilegeto track everyminutedetails from time to time to assess the operationof CO-Ops.CMS has emphasized that the loan recipient aresubject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period plus 10 years.
CO-Ops also needs to submit semi-annual program reports and quarterly financial statementsto CMS. CMS can conduct audits at their own will including site visits. The CO-Ops must also meet a series of milestones as laid out in theirloan agreements before drawing down any money from the program.
Future of CO-OPs:
CO-OPs is something whichthe US healthcare system needsto thrive. It is definitelythe future of healthcare in Americaand if properly executed it will only benefit the overall economy of the country.A cautious effort is the need of the hour. For example, CO-OPs must make intensive useof clinicaldata to assess which hospitals or physicians are providingthe best affordable care to patients.Also,focused approach is required on reinvesting the surplus.
It wouldn’tbesurprisingthat in times to come, CO-Ops could turn out be aviable alternativeto other form of health insurance in the insurance exchanges