This article first appeared in the St. Louis Beacon, Jan. 10, 2013 - Buried in the Affordable Care Act is a provision to give individuals and small businesses in all states the option of buying their health insurance from a nonprofit cooperative.
Missouri might have missed the boat because funding for low-interest federal loans to set up co-ops has been eliminated for now as part of the fiscal cliff negotiations. The health-reform law provided seed money to add a co-op insurance option to insurance exchanges in all 50 states.
The federal government already has approved about $1.9 billion in loans for co-ops in 24 states, including $160 million for one in Illinois. Missouri was among states awaiting funding when Congress eliminated the remaining $1.4 billion for the co-op loan program.
“We were blindsided by the elimination of funds,” John Morrison, president of the National Alliance of State Health Cooperatives, told Kaiser Health News. “The health insurance industry is getting its way here by torpedoing co-ops in the 26 remaining states.”
America’s Health Insurance Plans is a national trade association representing the nation’s major insurers. When asked if the industry had lobbied Congress to end CMS loans for co-ops, AHIP spokesperson Robert Zirkelbach said, “The answer to your question is no. AHIP’s comments were focused on ensuring a level playing field between co-op coverage and other coverage offered to consumers.”
The co-op model is regarded as an innovative and potentially cheaper alternative to buying insurance from for-profit carriers. Under the health-reform law, nonprofit groups wanting to run a co-op submit proposals to the Centers for Medicare and Medicaid Services. The agency has made matters easier by doing an actuarial analysis to determine how much reserve funding each plan needs for solvency. CMS then decides whether to approve a low-interest loan to help the nonprofit group set up the co-op.
Co-op is an acronym for Consumer Operated and Oriented Plan. Missouri’s program was developed in part by the Mission Center, which provides accounting, human resource management and insurance services to tax-exempt organizations. The Missouri Foundation for Health awarded the center $500,000 to develop a business plan for the Missouri Community Healthcare Co-Op. In addition, the co-op applied for a $60 million loan, now in limbo, from CMS, says Chris Miller, CEO of the Mission Center.
CMS has yet to comment on the action by Congress. But Miller regards Congress’ “unexpected hit” as a temporary setback. “We firmly believe the Missouri co-op will go forward,” he says.
When and if funding is restored, he expects the Missouri program to have about 20,000 subscribers. He adds that uncertainties surrounding the law makes it difficult to project whether co-ops will cut costs right away. But he says savings should result because much of the revenue coming in will be poured back into the co-op for health services rather than for profit for investors or for relatively high administrative costs common among private health insurance plans.
The Missouri co-op’s board members include Scott Lakin, former head of the Missouri Department of Insurance; and Ron Levy, former CEO of SSM Health Care-St. Louis and former director of the Missouri Department of Social Services.
The first co-op application approved by CMS was from the Montana Health Co-Op. That plan will result in lower health insurance costs to individuals and small businesses, predicts CEO Jerry Dworak.
“We have a 20 percent uninsured rate in Montana,” he says. “There must be a better way. The Affordable Care Act allows insurers to take up to 20 percent off the top for administration. That’s a travesty, very inefficient. We think we can develop a model of administrative cost of 10 percent or lower.”
Montana has a major ally in Sen. Max Baucus,, D-Mont., who helped to get the co-op language in the health-reform law. He told the Missoulian, a Montana newspaper, that co-ops were "the types of grass-roots solutions we should be investing in now, to help us lower spending over the long term."
Like Missouri, Montana will allow the federal government to set up its health insurance exchange. But unlike Missouri, Montana is expected expand its Medicaid program.
