The Center for Consumer Information & Insurance Oversight

CO-OP Health Plans: More Competition, New Choices for Consumers and Small Business

Consumers and small businesses are frustrated by the lack of affordable choices of health insurance options in the individual and small group insurance markets. Thanks to the Affordable Care Act, consumers may soon be able to go to the Affordable Insurance Exchange in their state and sign up for a new type of health plan called a Consumer Oriented and Operated Plan, or “CO-OP”. CO-OPs are private, non-profit health insurers whose boards of directors are made up of the customers of the CO-OP. CO-OPs are designed to offer quality, affordable, consumer-friendly health plans in every state.

On December 8, the U.S. Department of Health and Human Services (HHS) issued final standards for establishing CO-OP health insurance plans. Eligible organizations seeking to establish a CO-OP are able to apply for low interest loans to fund start-up costs and meet solvency requirements. The first round of loan applications was due on October 17, 2011 with subsequent quarterly application deadlines through December 31, 2012.

A New Choice for Consumers

A CO-OP is a private, nonprofit organization that sells health insurance coverage and will be subject to the same rules as other health insurers.

Unlike many health insurance companies today, a CO-OP:

  • Gives its enrollees a say in their health plan. CO-OP members elect the board of directors, a majority of whom must also be enrolled in the CO-OP health plan.
  • Uses profits to benefit enrollees. CO-OPs are required to use their profits to lower premiums, improve health benefits, improve the quality of health care, expand enrollment or otherwise contribute to the stability of coverage for members.
  • Educates enrollees about the plan. Because a CO-OP relies on its enrollees to help decide the direction of the plan, communication about key features of the plan will be a high priority.

Giving Small Businesses a New Insurance Option
A CO-OP will have the option to sell coverage to small businesses, helping give them the control over their health coverage that many of their larger competitors have now. Small business owners will be able to go through a new competitive insurance marketplace for small businesses known as a Small Business Health Option Program or “SHOP.” The final rule ensures that a CO-OP that offers any coverage to small businesses also participates in SHOP.

Level-Playing Field Coverage
CO-OPs will meet the same standards as all other health insurers to be licensed in the state where they offer coverage. Starting January 1, 2014, CO-OPs like all other health insurers will have to meet the set of standards in order to sell health plans through the new Exchanges. As an extra protection, CO-OPs will also demonstrate that premiums and any federal loans are being used appropriately and for the benefit of enrollees.

Helping CO-OPs Get Started
The CO-OP program has a one-time $3.8 billion appropriation to support loans to help set up and maintain CO-OP health insurance issuers. All CO-OP loans must be repaid with interest and loans will only be made to private, nonprofit entities that demonstrate a high probability of becoming financially viable.

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.

The final rule can be found at!documentDetail;D=HHS_FRDOC_0001-0435

Further information on the Consumer Operated and Oriented Plan program, including the recommendations of the Federal Advisory Board on CO-OPs and information for prospective applicants, can be found at:

Read a fact sheet about CO-OP loans:

To learn more about CO-Ops and the Affordable Care Act visit

Make the most of your expanding health care choices. Visit to learn more about the Affordable Care Act.

Posted on: July 18, 2011

Last Updated: February 21, 2012