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Informing Policy. Advancing Health.

Can CO-OPs answer the cry of consumers?

February 29, 2012

Many of us remember the heated debate during the development of the Affordable Care Act  (ACA) surrounding the “public option,” which would have created a publicly administered alternative to private health insurance coverage. What some of us may not remember was the final compromise. With strong advocates on both sides of the debate, the public option could not be included nor forgotten in the final bill. In the end, the Consumer Oriented and Operated Plan (CO-OP) program won. The compromise lies in the idea that these nonprofit CO-OPs will provide consumers with an alternative to private health insurance companies.

CO-OPs are now gaining traction. On February 21, the Centers for Medicare and Medicaid Services announced that seven CO-OPs will receive loans in the coming months. CO-OPs are designed to act much like traditional cooperative organizations, such as utility cooperatives, credit unions or even REI. They are to be private, non-profit, consumer-run health insurance companies, and they must reinvest any profits to offer lower premiums or better services.

The Rocky Mountain Farmer’s Union (RMFU) is assessing the feasibility of a CO-OP in Colorado, and possibly Wyoming. The RMFU represents rural residents in Colorado, Wyoming and New Mexico and is dedicated to sustaining rural communities. RMFU’s interest in CO-OPs lies in the idea that rural communities could benefit from a health insurance co-operative organization with a strong rural focus.

Total CO-OP funding is $3.8 billion nationally and will be used to offer at least one organization in every state start-up and solvency loans that must be repaid (at a very low interest rate). To be successful in competing with well-established insurance companies, these CO-OPs ideally would be up and running by January 1, 2014, when doors open for the state-based health insurance exchanges and an anticipated flood of consumers begin looking for health insurance. Because CO-OPs will be new organizations (CO-OPs could not have been a licensed insurer before July 2009), taking advantage of the influx of new consumers on the exchange would be critical.

This leaves a tight timeline for organizations to develop a benefit package, a network of providers and hospitals, and a solid consumer base that will be successful enough to repay federal loans. Many believe the idea of a non-profit, consumer-driven health insurance company will be widely appealing to consumers.

RMFU is not new to the idea of co-operatives, and neither are its members. With a wealth of experience developing and maintaining co-operatives throughout the years, RMFU is excited to see how a health insurance CO-OP could benefit rural communities.