Health Insurance CO-OPs: Consumer Operated and Oriented Health Plans

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Few things are changing as rapidly as health care insurance. This presentation supplies basic background as well as a look at the current landscape. By Jim Dietz, DBL Law

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Health Insurance CO-OPs: Consumer Operated and Oriented Health Plans

  1. 1. Health Insurance CO-OPs Consumer Operated and Oriented Health Plans (“CO-OPs”) James Dietz DBL Law
  2. 2. CO-OP Program Background • Health cooperatives – nothing new. • Original ones date back to Depression era and “New Deal” legislation. • While most of the original cooperatives are gone, several created in 1940s – 1950s are still operating. • Distinction from other nonprofit health insurers – consumer governance. Membership elects board or has presence on board. • New cooperative movement started with recent health reform efforts. They were a compromise to a call for a public health insurance option. • Cooperative proposal first put forward by Sen. Kent Conrad (D-ND). • Legislation was included as part of The Patient Protection and Affordable Care Act (PPACA) of 2010.
  3. 3. CO-OP Program Background • Congress’s original intention was to drive the creation of member-run cooperative health insurers in all 50 states. • Budget cuts have detoured (or possibly eliminated) this goal.
  4. 4. CO-OP Program Background • These nonprofit, consumer-driven organizations were to offer health coverage, through the Exchanges, under the same regulatory requirements imposed on private insurers at the State and Federal levels. • Section 1322 of PPACA requires Congress to provide start-up funding for non-profit health insurance issuers (i.e., CO-OPs).
  5. 5. CO-OP Program Background • Goals for CO-OPs: – provide more consumer choice – greater control – greater plan accountability – promote better models of care, similar to ACOs
  6. 6. CO-OP Program Background • PPACA set aside $6 billion for start-up costs and state solvency requirements. • Reduced to $3.4 billion by law in 2011. Further reduced in January 2013.
  7. 7. CO-OP Program Background • Congress is to expend all co-op funds by July 1, 2013. • Funds are loaned for start-up and solvency costs. • Start-up loans must be repaid within 5 years; solvency within 15 years.
  8. 8. CO-OP Program Background • Loan applicants had to submit detailed plans: feasibility study, business plan, budget, enrollment strategy, budget projections, and more. • Successful applicants could recoup up to $100,000 for costs incurred to develop the application.
  9. 9. Health Insurance CO-OPs Legal Issues
  10. 10. Legal Issues • To qualify for the CO-OP program, an entity must: – be a non-profit corporation – be governed by a majority vote of its members – operate with “a strong consumer focus” – all profits used to lower premiums, improve benefits, or improve quality of care
  11. 11. Legal Issues • A CO-OP may not be: – an existing health insurer – an entity that shares ownership with existing health insurers – sponsored by state or local government – owned or controlled by a for-profit entity
  12. 12. Legal Issues • A CO-OP must conduct “substantially all” of its activities in the individual and small group markets. • "Substantially all" means two-thirds of its activities. • It must offer qualified health plans on the newly-created State Health Benefit Exchanges.
  13. 13. Legal Issues • Permanent board of Directors must be comprised of at least 51% members. • A minority of board positions can be reserved for experts in finance, quality of care, marketing, research, law, etc.
  14. 14. Legal Framework • Temporary formation board guides the CO-OP through the application process. • Must be replaced by the Member-controlled board within 1 year of launch of business.
  15. 15. Legal Issues • Centers for Medicare & Medicaid Services (CMS) will closely monitor loan recipients. • Ensure CO-OPS are meeting program goals and will have the ability to repay their loans.
  16. 16. Legal Issues • CO-OPs must submit quarterly financials, including cash flow, enrollment data. • Will receive site visits and annual external audits. • This monitoring is in addition to oversight by state insurance regulators.
  17. 17. Health Insurance CO-OPs The Program Today James Dietz DBL Law
  18. 18. The Program Today • To date, a total of 24 non-profits offering coverage in 24 states have been awarded $1,980,728,696 ($1.98 Billion).
  19. 19. The Program Today • States with approved CO-OPs.
  20. 20. The Program Today • Arizona, Colorado, Connecticut, Illinois, Iowa, Nebraska, Kentucky, Louisiana, Maine Maryland, Massachusetts, Michigan, Montana, Nevada, New Jersey, New Mexico, New York, Ohio, Oregon, South Carolina, Tennessee, Utah, Vermont, Wisconsin
  21. 21. The Program Today • There is a national CO-OP advocacy organization: National Alliance of State Health Cooperatives (NASHCO).
  22. 22. The Program Today • In January 2013, Congress eliminated any new start- up loans for CO-OPs as part of the "Fiscal Cliff" package. New law rescinded all but 10% of funds that had not been committed at that point, so that $200 million is available to assist and oversee the 24 CO-OPs. • No additional CO-OPs beyond the 24 will be funded. • More than two dozen others had applications pending when funds were rescinded.
  23. 23. Health Insurance CO-OPs The Kentucky Health Cooperative, Inc. James Dietz DBL Law
  24. 24. Kentucky CO-OP • Kentucky Health Cooperative, Inc. (KYHC) is Kentucky's CO-OP program. • Headquartered in Louisville • Awarded a total $58.8 million loan in June 2012 • Start-up loan disbursed in increments based upon compliance with various milestones
  25. 25. Kentucky CO-OP • Formation board hired Janie Miller as CEO • Former Secretary of the Kentucky Cabinet for Health and Family Services (2008- 2012) • Former Commissioner for the Kentucky Department of Insurance
  26. 26. Kentucky CO-OP • KYHC Formation Board is led by Chairman Joseph E. Smith, Executive Director of the Kentucky Primary Care Association. • Other Formation Board members: – Chris Goddard: CEO of HealthPoint Family Care, a nonprofit medical and dental practice.
  27. 27. Kentucky CO-OP • Other Formation Board members: – David Worthy, M.D. - Medical Director of Baptist Regional Memorial Hospital and the former CEO of Grace Community Health Center. – Jim Dietz - Partner with the law firm of Dressman Benzinger Lavelle.
  28. 28. Kentucky CO-OP • Ms. Miller worked with the formation board in hiring an executive team, with positions, job descriptions, and compensation reviewed and approved by CMS • Received many well-qualified applicants, and thus was able to assemble an executive team with experienced personnel.
  29. 29. Kentucky CO-OP • KYHC is required to start issuing policies on October 1, 2013, and providing coverage as of January 1, 2014. KYHC is on-target to meet this. • Currently has almost $10 million in start-up loans and $15 million in solvency loans. • Remainder of loans will be solvency loans and will be disbursed in the future.
  30. 30. Kentucky CO-OP • Mission Statement: • “The Kentucky Health Cooperative exists to promote community health and well-being by engaging the members and providers it serves in the valued delivery of quality coverage of integrated health care services.”
  31. 31. Kentucky CO-OP • Has been constructing a state-wide network through contracts with provider, coalitions, IPAs, and other provider networks. • Plans to develop a state-wide network from beginning in order to market to all individual Kentuckians and small employers. • Goal is to have state-wide direct network by second year of operations.
  32. 32. Kentucky CO-OP • Licensed as an HMO in Kentucky as of March 2013. • Executive team have worked with Board in securing necessary services contracts with professionals and vendors – HR, IT, pharmacy benefit, claims processing, marketing, actuary, audit, etc.
  33. 33. Kentucky CO-OP • Was third of 24 CO-OPs to be granted state operational license; first in its batch of CO-OPs (which was the third overall batch approved by CMS. • Feedback from CMS is that Kentucky CO-OP is leading the pack toward being operational by January 1, 2014.
  34. 34. Kentucky CO-OP • KYHC plans to hire 50+ employees by the end of 2013. • For more information, visit the KYHC website: www.mykyhc.org

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