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5 Challenges for CO-OPs

Margaret Dick Tocknell, for HealthLeaders Media, September 7, 2011

In July the Department of Health and Human Services announced proposed rules to regulate the creation of consumer-operated and -oriented plans, or CO-OPs. With the October 17th application deadline fast approaching it seems like good time to take another look at CO-OPs to assess their likelihood of success.

CO-OPs are designed to be non-profit, member-governed health plans that create another consumer option for cost-effective healthcare insurance.

When the program was first announced, Courtney White, a principal and consulting actuary in the Atlanta office of Milliman Inc., explained in an interview with HealthLeaders Media that "CO-OPs will look like a regular insurance company. They'll take risk, make reimbursements and process claims."

He identified accountable care organizations, integrated delivery systems and chambers of commerce as likely candidates to form CO-OPs.

HHS will kick-start the CO-OPs process with $3.8 billion in loans, or about $100,000 per applicant to help fund feasibility studies and business plans. 

Analyst Bradford Gray, Ph.D., wonders if that will be enough to guarantee the success of this latest option to individual and small business healthcare coverage. Gray, a senior fellow at the Washington, D.C.-based Urban Institute, a nonpartisan policy research organization, explained  that "CO-OPs may become important insurance options in some markets, but it is difficult to foresee their having a transformative effect that was expected of the public option."

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2 comments on "5 Challenges for CO-OPs"


Arun K.Potdar (9/10/2011 at 10:10 AM)
How does the new CO-OP concept differ from now almost extinct Group Health Organizations (GHA)(HMO) of past? I worked for one in DC for 9 years. Yes, it is designed for the profits to be ploughed in but making profits is a Herculean task. Since everyone including the plan employees will own it and board will be elected by the membership, one can imagine who will be on the board and the politics of left vs. right will make profitable and rational decision making difficult if not impossible. Unless new version is designed to avoid the weak administrative structures of GHAs, CO-OPs are likely to follow the fate of GHAs and Union Benefit Plans. Lastly, will the State Insurance Commissioners have any controls like the guaranteed issues and rate setting criteria or is there another federal agency created for overseeing the Co-Ops?

bob (9/7/2011 at 5:19 PM)
Don't many [most?] of the problems correctly identified by Brad Gray disappear or can be dealt with readily by not-for-profit Blue Plans re-organizing as co-op's?