On Dec. 8, the Centers for Medicare and Medicaid Services (CMS) released the Final Rule produced by the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan (CO-OP) Program under Section 1322 of the Patient Protection and Affordable Care Act (PPACA). The following are some of the highlights:
“Substantially All” Requirement:
-The Final Rule confirms that many larger employers will be able to participate in CO-OPs by permitting up to one-third of all CO-OP contracts to be purchased by such large employers. It provides that Section 1322’s requirement that “substantially all” health insurance issued by the CO-OP is placed in the individual and small group markets is satisfied where two-thirds of its contracts are in those markets. The Final Rule confirms also that the two-thirds standard applies to all of the activities in the CO-OP, an interpretation that HHS believes properly encourages providers who may want to offer a CO-OP option to their employees to participate in CO-OP provider networks.
-In response to concerns regarding extensive state licensure requirements and in an attempt to provide flexibility for and ensure the viability of CO-OP providers, the Final Rule significantly extends the timeline when CO-OPs are required to be offering qualified health plans (meeting the “substantially all” requirement). As a result of this change, a loan recipient will now have two years from the solvency loan draw down dates to begin providing health care coverage in the exchanges and to meet all minimum CO-OP requirements.
CO-OP Governance:
-The Final Rule extends the transition period from the formation to the operational board from one to two years after the CO-OP enrollment begins, permits the staggered election of the operational board, and permits the formation board to fill its vacancies, without a contested election.
-Providers are prohibited from composing a majority of the CO-OP board of directors unless, as will sometimes be the case, the provider-board members purchase the product themselves, in which case they can serve as board members in their capacity as CO-OP members.
Eligible Participants and Sponsor: Under the proposed rule, the following were listed as not eligible to apply for or receive a loan under the CO-OP program:
-Pre-existing insurance issuers;
-Trade associations whose members consist of pre-existing issuers;
-Entities related to pre-existing issuers;
-Predecessors of pre-existing issuer or related entity
-Organizations sponsored by a state or local governments
-Foundations established by a pre-existing issuer
-Holding companies that control pre-existing issuers
-Organizations sponsored by pre-existing issuers; and
-Organizations that receive more than 25 percent of their total funding (not including loans under the CO-OP program) from pre-existing issuers.
The Final Rule clarifies that private non-profit hospitals and physician hospital organizations, or other organizations that receive financial support from a state or local government are not instrumentalities of a state or local government, and are therefore eligible CO-OP participants, so long as:
-The entity is not a government organization under state law;
-No employee of state or local government acting in his or her official capacity serves as a senior executive; and
-State or local government employees acting in their official capacities do not comprise the majority of the CO-OP board of directors.
Additionally, the Final Rule permits applicants to receive up to 40 percent of CO-OP funding from a state or local government without being considered an instrumentality of such government entity.
