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January 2012 St@teside

CMS Issues CO-OP Final Rule

The Centers for Medicare & Medicaid Services (CMS) issued its final rule on the implementation of the Consumer Oriented and Operated Plans (CO-OP) program. CO-OP plans are private, nonprofit plans run primarily by individual and small-group customers. According to CMS, the main purpose of establishing the program is to provide competition to for-profit health insurance plans thereby reducing premiums, promoting efficiency, and improving services and benefits to enrollees.

The Affordable Care Act (ACA) provided $6 billion in implementation funding; however, funding was cut during the recent budget negotiations to $3.8 billion.  The program will provide two types of CO-OP loans: 1) loans meant to help with the start-up costs, which need to be repaid in five years; and 2) loans that would help plans meet solvency and reserve requirements, which need to be repaid in 15 years.

According to the rule, the funding is only available to new nonprofit plans and not to existing insurers. Furthermore, the final rule requires that CO-OPs must meet the same state and federal standards as current insurers including those established by the health insurance exchange.  The final rule also allows state and local governments to provide funding to a CO-OP as long as the funding does not exceed 40 percent of its total funding and the government entity does not control the CO-OP.

Currently CO-OP plans operate only in four states: Idaho, Minnesota, Washington, and Wisconsin. They serve about 2.1 million people and represent approximately 1 percent of the private insurance market1. The ACA envisions at least one CO-OP will launch in each state.

1Reichard, J. (2012, January 12). Washington Health Policy Week in Review HHS Issues Final Co-op Rule to Spur Consumer-Friendly Health Insurance.  The Commonwealth Fund. Retrieved on January 20, 2012 from