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5 Challenges for CO-OPs

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

In his report, CO-OPs: An Early Assessment of Their Prospects,Grayidentifies five challenges he says CO-OPs face for long term success:

1.      Building the provider network and administrative structures. Attracting members and sustaining growth will depend on having a network of providers who deliver quality care at a cost that allows the CO-OP to price itself competitively and not lose money. Contracting with providers is a difficult and time-consuming process that requires a sophisticated infrastructure to deal with administrative matters such as marketing and network management as well as utilization and cost management. At first many CO-OPs will probably need to rent a provider network and obtain administrative services from an existing third-party administrator. That can be expensive.

2.      Building enrollment. This is important for economies of scale and negotiations with providers, but no one knows who will really be interested in CO-OPs. At least 25,000 enrollees and a minimum market share of 5% will be needed to achieve financial and operational stability. CO-OPs that already have access to potential enrollee populations will have an advantage. Gray suggests that the best way to quickly build membership will be to gain access to groups that already exist, such as labor unions, employer associations or a self-insured medical organization. Remember, CO-OPs will face competition from health insurance exchanges so being ready to accept enrollment during the October 2013 open enrollment period before HIX open for business a few months later will be critical.

3.      Overcoming the prohibition on marketing. The Affordable Care Act prohibits CO-OPs from using loan funds for marketing, which could make it more difficult at startup to reach potential enrollees. Marketing is a significant expense for health plans and will be particularly important for new plans.

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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?