The U.S. Department of Health and Human Services (HHS) has issued a final rule (pdf)  implementing the Consumer Operated and Oriented Plan (CO-OP) program under the Affordable Care Act. The CO-OP program is designed to provide loans to encourage the creation of consumer-governed, private, nonprofit health insurance issuers that will ultimately offer qualified health plans in the health insurance exchanges, set to begin operation in 2014. According to the HHS, the purpose of the program is to “create a new CO-OP in every state in order to expand the number of health plans available in the Exchanges with a focus on integrated care and greater plan accountability.” The loans, which must be repaid with interest, will be made to private, nonprofit entities that are able to show that they will be financially sound. To this end, the final rule lays out the standards an entity must meet to be eligible for and participate in the program, outlines the standards by which the CO-OP must operate, and sets forth the CO-OP loan terms, including repayment criteria and interest rates.

Generally, a “qualified nonprofit health insurance issuer” eligible to participate in the CO-OP program is an organization that is organized under state law as a private, nonprofit, member corporation, conducts activities primarily related to the issuance of CO-OP qualified health plans in the individual and small group markets in each state, and meets other requirements outlined in section 1322(c) of the health care reform law. Notably, issuers that existed prior to July 16, 2009 cannot participate in the CO-OP program, as the purpose is to create new consumer-governed, private, nonprofit health insurance issuers. Similarly excluded are: (1) holding companies that control pre-existing issuers, foundations established by pre-existing issuers, and trade associations that are comprised of pre-existing issuers and whose purpose is to represent the interests of the health insurance industry; (2) organizations sponsored by a pre-existing issuer; (3) organizations that receive more than 25% of their total funding (excluding any loans received from the CO-OP program) from pre-existing issuers; and (4) instrumentalities of state or local governments. The law does permit CO-OPs to use experienced managers and health care organizations to manage the functions they have to perform in providing health insurance.

This rule takes effect 60 days after its publication in the Federal Register, which is scheduled for December 13, 2011.

Photo credit: Andriy Solovyov