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

1. Health Insurance CO-OPs
Consumer Operated and Oriented
Health Plans (“CO-OPs”)
James Dietz
DBL Law

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. 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. 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. 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. 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. 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. 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. Health Insurance
CO-OPs
Legal Issues

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. 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. 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. 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. 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. 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. 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. Health Insurance
CO-OPs
The Program Today
James Dietz
DBL Law

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. The Program Today
• States with approved
CO-OPs.

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. The Program Today
• There is a national CO-OP advocacy
organization: National Alliance of State Health
Cooperatives (NASHCO).

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. Health Insurance
CO-OPs
The Kentucky Health
Cooperative, Inc.
James Dietz
DBL Law

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. 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. 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. 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. 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. 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. 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. 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. 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. 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. Kentucky CO-OP
• KYHC plans to hire 50+ employees by the end
of 2013.
• For more information, visit the KYHC website:
www.mykyhc.org