How the legislation's restriction on using loan funds for marketing is implemented in practice will be important.
4. The danger of adverse selection. The mix of enrollees will be important. Established competitors will probably be more skilled at attracting the healthiest patients. CO-OPs will need to set premiums low enough to attract enrollees but high enough to cover costs.Setting premium prices for people who have been uninsured will be difficult because so many of the new enrollees will have a backlog of unmet medical needs.
5. Making member governance work. Plans will need board expertise in finance, strategic planning, product development, contracting, actuarial functions and medical management. The proposed HHS rules require that CO-OP boards be elected by members and that CO-OP members account for a majority of the board. Boards can include experts who are not plan members as long as the nonmember experts account for only a minority of the board. Given that limitation, the challenge will be to make sure the membership of a CO-OP includes as many experts as possible so needs in finance, strategic planning ,etc. can be met.
Despite these challenges, Milliman's White says CO-OPs "will still have a great story to tell: 'We're member-run and we put our profits back into the business to lower member premiums, and to improve member benefits and care.'"