The Affordable Care Act creates a program to help create new, private nonprofit health insurers, called Consumer Oriented and Operated Plans, or “CO-OPs.” The CO-OP program offers low-interest loans to eligible private, nonprofit groups to help set up and maintain health plans. CO-OPs are directed by their customers and designed to offer individuals and small businesses additional affordable, consumer-friendly and high-quality health insurance options. Starting January 1, 2014, CO-OPs will be able to offer health plans through the new, competitive health care marketplaces in each State, called the Affordable Insurance Exchanges. In addition to offering health plans through an Exchange, CO-OPs may also offer health plans outside of an Exchange.
The first round of applications was due on October 17, 2011, and we anticipate making awards in January 2012. There will be subsequent quarterly application deadlines through December 31, 2012. We are pleased with the large number of CO-OP loan applications and encouraged by the strong response. We anticipate receiving more applications in the subsequent rounds of applications.
A CO-OP is a new type of nonprofit health insurer that is directed by its customers, uses profits for customers’ benefit, and is designed to offer individuals and small businesses affordable, customer-friendly, and high-quality health insurance options. CO-OPs may operate locally, State-wide, or in multiple States. CO-OPs must be licensed as issuers in each State in which they operate and are subject to State laws and regulations that apply to all similarly-situated issuers.
The CO-OP loan program has a one-time $3.8 billion appropriation to support loans.
Nonprofit organizations may apply for two types of low-interest loans:
Start-up Loans must be repaid in five years and Solvency Loans must be repaid, with interest, in 15 years from the date of disbursement.
The CO-OP program contains extensive provisions to protect against fraud, waste, and abuse. Loan recipients are subject to strict monitoring, audits, and reporting requirements for the length of the loan repayment period plus 10 years. Recipients will submit semi-annual program reports and quarterly financial statements. Additionally, CMS will conduct audits including site visits, as appropriate. CO-OPs must meet a series of milestones as laid out in their loan agreements before drawing down any money from the program.
Applicants represent a broad array of stakeholders in States across the country. They include small business coalitions, physician and hospital providers and associations, agricultural organizations, unions, and community-based sponsors. To apply for a loan under the CO-OP program, a group must first form a nonprofit, not-for-profit, or public benefit member organization that is organized under State law and intends to become a CO-OP. Interested groups are not required to organize as a cooperative under State law.
An organization cannot apply for a CO-OP loan if:
CO-OPs must meet the same State requirements as all other similarly-situated health insurance issuers. CO-OPs are responsible for working with the relevant State Departments of Insurance or licensing agencies to achieve licensure. CO-OPs like all other health insurers will also have to comply with Exchange rules.
How Does the Final Rule Differ from the Proposed Rule?
The CO-OP Program Final Rule released on December 8, 2011 clarifies the types of organizations eligible to apply for CO-OP loans. Specifically, the final rule explains that:
The U.S. Department of Health and Human Services has published two key documents establishing the CO-OP program:
If you have any questions about the CO-OP program or would like to request additional information, please contact CO-OPProgramQuestions@cms.hhs.gov.