From The Field F E B R U A R Y 1 8 , 2 0 1 3 Nonprofit Competition in the Health Insurance Exchange: Consumer Operated and Oriented Plans JILL ZORN, M.B.A. Senior Program Officer, Universal Health Care Foundation of Connecticut W hen the Affordable Care Act (ACA) was passed, sure they fulfill the goals of the CO-OP program and are capa- Section 1332 established the Consumer Operated ble of meeting their loan repayment obligations. CO-OPs and Oriented Plan (CO-OP) program, which have up to five years to repay start-up loans and 15 years for offers a consumer-friendly, high-quality nonprofit competitor solvency loan repayment. to provide affordable insurance products to the small employ- Congress originally allocated $6 billion to fund the CO-OP ers and individuals that will be served by the health insurance program. In 2011 that amount was reduced to $3.4 billion as exchanges. The CO-OP provision was a political compromise, part of budget deficit legislation (Gardiner et al. 2012). In a developed as an alternative to the more controversial public last minute twist that went largely unreported in the press, the option. most recent fiscal cliff legislation zeroed out all remaining CO- Historically, the establishment of a new insurer has been OP dollars, illustrating that ACA funding continues to be impeded by the difficulty of obtaining start-up capital and vulnerable in an era of deficit reduction. At least 40 applica- meeting reserve requirements. The ACA overcame this barrier tions were pending at the time of the fiscal cliff deal, and, as of to entry by providing low-interest loans to fund CO-OP start- now, have no chance of being funded. up costs and the even bigger financial hurdle of establishing By the end of 2012, 24 CO-OPS had been approved by the insurance reserves required for licensure. CMS and just under $2 billion had been awarded. These CO- OPs, listed below, will be moving forward. KEY CO-OP FEATURES CO-OPs are consumer-governed. A majority of the members Region States of the board of directors must be drawn from the customers who purchase the CO-OP’s insurance. CO-OPs must remain West Arizona, Colorado, Montana, Nevada, not-for-profit and cannot be sold to for-profit entities. Any New Mexico, Oregon (2), Utah “profits” made by the CO-OP must be returned to the mem- Midwest Illinois, Iowa/Nebraska, Michigan, bers in the form of lower premiums, improved benefits, or Ohio, Wisconsin quality enhancement. To ensure more competition in the health insurance exchanges, at least two-thirds of the contracts South Kentucky, Louisiana, South Carolina, written by a CO-OP must be offered in the individual and Tennessee small group markets. They are not prohibited, however, from East Connecticut, Maine, Maryland, competing in the large group market. CO-OPs are expected to Massachusetts, New Jersey, New have a strong consumer focus and to offer innovative delivery York,Vermont and payment models that promote integrated, coordinated, quality affordable health care. Source: NASHCO 2013 CO-OP FUNDING AND LOCATIONS In order to qualify for federal loans, CO-OPs must complete a Some CO-OPs serve a specific region while others are lengthy application and extensive feasibility study, which is statewide. They can be found in urban, suburban, and rural then reviewed by the Centers for Medicare and Medicaid settings. There is significant diversity among the sponsoring Services (CMS). Once approved, they are required to meet organizations, from coalitions of businesses and community regular benchmarks monitored by CMS, designed to make leaders, to physician organizations or hospital systems, to unions and community organizations. A complete list of CHALLENGES AND OPPORTUNITIES CO-OPs can be found on the Web site of the National There are many challenges for new CO-OPs. They are new Alliance of State Health Cooperatives, the member entrants in a marketplace where competitors are well- organization formed to provide support to the health CO-OP established and well-capitalized. In a short period of time, they movement. must build provider networks, develop the infrastructure and information technology (IT) resources needed to pay claims CONNECTICUT and enroll and track membership, and manage the consumer Universal Health Care Foundation of Connecticut (UHCF) governance structure required of CO-OPs. In order to succeed, began exploring the CO-OP option after legislation to they must become licensed and ready to offer insurance prod- implement SustiNet, the public option the foundation had ucts on the insurance exchanges by October 1, 2013. At the same time, CO-OPs have the advantage of not being supported, died in the 2011 legislative session. In the late wedded to old ways of doing business. They are coming out of summer of 2011, the Connecticut State Medical Society and the gate ready to operate in a world where the incentives are the Connecticut State Medical Society Independent Practice rapidly changing from volume of care to value of care. They are Association approached UHCF, seeking funding for their being built on partnerships between community leaders and joint development of a CO-OP application. UHCF providers and are focused on consumer engagement, keeping approved a $50,000 grant to the Connecticut State health care affordable, and improving individual and popula- Medical Society Physician Health and Education Fund to tion health outcomes. CO-OPs are not saddled with legacy IT support research on benefit design and the information systems. They can start up with systems that support innovative systems needed to measure, promote, and report on and integrated payment and delivery models and provide the clinical quality and performance. UHCF felt strongly information needed to help providers improve performance and that introducing a new nonprofit, consumer-governed, consumers to better manage their health conditions. innovative alternative into Connecticut’s highly consoli- dated, for-profit, very traditional health insurance market FUTURE FUNDING OPPORTUNITIES would have a major impact on health reform in the state. One of the most significant challenges faced by CO-OPs is In June 2012 CMS awarded $75.8 million to Connecticut’s that they are banned from using federal loan funds for CO-OP, HealthyCT. Once licensed, HealthyCT will be the marketing. In response, the Maine Health Access Foundation first new entrant to the state’s insurance market since the has awarded a one-year grant of $300,000 to MCHO to sup- mid-1980s. port community outreach, public education, and marketing HealthyCT has chosen to focus on implementing new (MeHAF 2013). Another opportunity is for national and delivery and payment models. It is using some of its loan state-based funders to support a coordinated national public funds to provide consultation and support to primary care information campaign from which all CO-OPs could benefit. practices throughout the state to achieve patient-centered A national campaign could be used by all CO-OPs, who could medical home (PCMH) recognition, an area of health then add local, tailored messaging that is state-specific. system transformation where Connecticut has lagged behind neighboring states. By the end of the year, this support will Funders considering funding CO-OPs should understand have doubled the number of PCMH-recognized practices in that while they are not-for-profit entities, they are not the state. 501(c)3s, but have a special designation: 501(c)29. This designation was created exclusively for these newly COLORADO AND MAINE created health insurance CO-OPs, even though many Other foundations also chose to provide planning support for existing nonprofit insurers have a 501(c)3 designation. CO-OP development, including The Colorado Health Those funders that are generally restricted to donating only to 501(c)3 organizations may wish to identify a Foundation, which provided a $71,000 grant to the Rocky 501(c)3 fiscal intermediary or exercise expenditure Mountain Farmers Union Educational and Charitable responsibility. Foundation to support the feasibility study required of all CO-OP applicants. The Colorado Health Insurance Cooperative was awarded $69.3 million in late July 2012 While the CO-OP program is a very small part of the ACA, it (NASHCO 2013). The Maine Health Access Foundation has the potential to have major impact on health reform in the awarded $200,000 to the Maine Primary Care Association states and markets where they compete. If CO-OPs can gather a over two years to help with the development of a CO-OP. critical mass of members in the first two years of the operation The grant was used to build a benefit design that would meet of the health insurance exchanges, they have the structure and the needs of prospective enrollees and focus on reducing costs nimbleness to become market leaders in delivery and payment and improving health outcomes. Maine Community Health transformation. Philanthropic investment at this crucial time to Options (MCHO) was awarded $62.1 million in March ensure the success of CO-OPs could make all the difference in 2012 (MeHAF 2013). moving the needle on health reform for all of us. SOURCES Gardiner, Terry, Roger Neece, and Michael Mendelevitz, Realizing Health Reform’s Potential Innovative Strategies to Help Affordable Consumer Operated and Oriented Plans (CO-OPs) Compete in New Insurance Marketplaces, <http://www.commonwealthfund.org/~/media/Files/Publications/ Issue%20Brief/2012/Apr/1591_Gardiner_innovative_strategies_help_coops.pdf>, April 2012. Maine Health Access Foundation (MeHAF), “MeHAF and Maine Community Health Options Announce $300,000 Grant to Support Development of a Member-Directed Health Insurance Plan,” <http://www.mehaf.org/news/2013/01/23/mehaf-and-maine-community-health- options-mcho-announce-300000-grant-support-development-member-directed-health-insurance- plan/>, January 23, 2013. National Alliance of State Health Cooperatives (NASHCO), “CO-OP Awards Fact Sheet,” <http://www.nashco.coop/documents/coop_awards_fact_sheet.pdf>, accessed 2013. Views from the Field is offered by GIH as a forum for health grantmakers to share insights and experiences. If you are interested in participating, please contact Osula Rushing at 202.452.8331 or orushing@gih.org.