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CMS clarifies rules for troubled CO-OP sector

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The federal government has clarified some regulations that govern the startup  nonprofit insurers called Consumer Operated and Oriented Plans (CO-OPs) created under the Affordable Care Act.

More than half of the original 23 of such plans have shut down as they struggled with financial and enrollment issues.

Among the clarifications, reports FierceHealthPayer:

  • “Federal regulations require two-thirds of CO-OPs’ policies in any given state to be qualified health plans in order to ensure the program ‘retains its focus on providing competitive, high-quality health plan choices to American consumers in the individual and small group markets.’ But the rest can be dental or vision plans, Medicare Advantage plans, large-group policies or Medicaid Managed Care products.”
  • “CO-OPs’ two types of federal loans–start-up loans and solvency loans–are treated differently in terms of repayment. Solvency loans are treated as surplus notes, meaning a CO-OP does not have to repay CMS until a state insurance department determines repayment won’t lead to distress or default. While start-up loans were intended as ‘general obligations to be repaid at a specific time,’ CMS agreed in 2015 to allow CO-OPs to convert these loans into surplus notes on a case-by-case basis to ensure financial flexibility for the CO-OPS.”
  • “CMS will evaluate on a case-by-case basis when a CO-OP’s risk-based capital level falls below 500 percent, determining whether it should be placed on a corrective action plan or if it is considered to be in default. This policy allows CO-OPs to more easily manage changes in their business operations….”
  •  CO-OP board members can’t now represent a pre-existing insurer or  a state government, but CMS is exploring ways “to help diversify board membership without losing the member-run nature of the CO-OP program.”

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