Healthcare Business News

CO-OP funding cut, but consumer-led plans may survive

By Rich Daly
Posted: January 3, 2013 - 7:30 pm ET

The fiscal cliff deal's elimination of funding for not-for-profit consumer-led health plans may not spell the end for such plans.

The last-minute deal cut $1.4 billion remaining from a $6 billion fund created to provide start-up and reserve monies to Consumer Operated and Oriented Plans, which are not-for-profit, consumer-owned health plans designed to increase competition in states dominated by large insurers.

Unaffected was the nearly $2 billion HHS has distributed to 24 such plans during the past two years, and the deal left some funding for continued federal technical assistance to those CO-OPs.

But the authors of at least 26 proposals for CO-OP funding submitted to HHS in December were caught by surprise, said John Morrison, president of the National Alliance of State Health Cooperatives.

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Several “were approved CO-OPs that were proposing to expand into neighboring states that didn't yet have a CO-OP, so they were already vetted operations that had already been subjected to due diligence and found meritorious,” Morrison said.

Members of Congress who support the CO-OPs as a way to counter the dominance of for-profit insurance companies may be tempted to search for the funding that advances any high quality applications already submitted to the CMS. But a primary proponent of the CO-OP plan who will not participate in any such a push is former Sen. Kent Conrad (D-N.D.), whose last day in office was the day after the fiscal cliff deal was approved.

Another way those CO-OP plans may survive is through non-governmental funding.

The Evergreen Project, a CO-OP forming in Maryland, received initial funding from Maryland foundations that supported its goal of focusing on the formerly uninsured and low-income families that will become eligible for insurance subsidies under health law. Eventually, that CO-OP also received federal funding.

An April 2012 report from the Commonwealth Fund also noted that at least two Midwest CO-OPs were developing partnerships with existing cooperative and consumer-oriented organizations like small-business advocacy groups.

Morrison said some of the other CO-OPs that have received federal funding also have received nongovernment support.

The CO-OP plans that missed the federal start-up might not be the only such plans looking for private sector help. Since the federal funds did not provide ongoing operating capital for the CO-OPs, some CO-OP officials have examined ways to obtain private investment capital, which would require regulatory changes.

Evergreen has suggested the CMS “develop regulatory guidelines that enable CO-OPs to offer reasonable, market-based, risk returns for sources of funding which permit CO-OPs to be adequately capitalized for the benefit of its members.”

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