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5 Challenges for CO-OPs

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

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.'"


Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
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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?