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What is a health insurance cooperative?

“To sum it up…”

  • Health insurance cooperatives are consumer-owned businesses that provide health insurance and managed health care services
  • Health insurance cooperatives were common in the 1930s and 1940s particularity in rural America
  • Health Insurance cooperatives have customers as their priority rather than profits
  • Health insurance co-ops drive prices down to benefit their members
  • The Affordable Care Act authorized a program called the Consumer Operated and Oriented Plan.

Cooperatives have been part of the healthcare providers from the very early developments of healthcare. These organizations serve their owners, and as such, they work for successful outcomes far more than financial success.

The high point for health insurance coops was in the Depression Era when they were a major source of health insurance and medical services for rural communities.

The Federal Farm Security Administration sponsored rural health cooperatives before 1947.

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Cooperatives and the Affordable Care Act


Cooperatives that existed before the Affordable Care Act can develop qualified health plans and sell on the Obamacare Marketplace and state exchanges.

Cooperatives created by the Consumer Oriented and Operated Plan Program did not sell qualified health plans previously within the rules for COOPs. They can offer plans for sale on the federal and state exchanges.

The Affordable Care Act authorized more than $2 billion in grants and loans for starting the COOPs. It also provided costs guarantee for the risk corridors that the law anticipated would come as new entrants sought to compete with established health insurance providers.

Building a Health Insurance Cooperative


The Affordable Care Act put a focus on national efforts to have universal coverage, low prices, and responsive service providers.

Coops have a long history as rural and community-based organizations that fill unique community needs.

In health services, the needs are great and coops must have adequate resources and a focused effort to meet them.

  • Network resources are the key asset for providing insurance coverage. he doctors and hospitals that deliver services are the core of the co-op operation
  • Qualified Health Plans
  • Low prices and premiums
  • No denials for preexisting conditions

Starting a Co-op


Starting a cooperative health insurance company is a long order. It needs money, it needs a network of doctors and hospitals, and it needs acceptance from the public that a new firm can serve their old and established health needs.

The law restricts coops to individuals and small groups. Small employers can work with co-ops.

Time works against the effort when one has to do it on a time frame imposed by the Affordable Care Act for submitting plans for approval to get the product on the Obamacare Marketplace.

Health Insurance is Local


Whether a company serves few or thousands of communities, the test of effective coverage is local. The provider must offer a service that is adequate to handle the expected volume of medical needs from the population it serves.

In individual and small group insurance, the federal Marketplace and state exchanges review plans. They can actively assist or merely pass through those that meet the letter of the law.

In Medicare Advantage, The Centers for Medicare and Medicaid oversee the adequacy of provider networks. They express concern with size and adequacy of networks.

If the network is filed out, the CMS will review it to determine if it is adequate. If it is not built-out, then the CMS will require a guaranteed undertaking to purchase at the point of service or some other network.

The Consumer Operated and Oriented Providers

The Affordable Care Act authorized the Centers for Medicare and Medicaid to develop a program for COOP organizations that would deliver high-quality services and drive down prices in the markets they served.

Promise versus Performance


The ACA COOP process had a vast potential to create new providers and to reduce the costs of healthcare. They were the engine of local competition in the areas they would serve.

The Republican resistance to the Affordable Care Act eventually targeted the guarantees for the COOPS; these corridors were needed to support the rapid deployment of healthcare networks that could compete with long-established household names in the healthcare industry.

COOPS to Serve the Sickest and Neediest


The COOPS took to the task of organizing service models that could absorb the larger than the chance percentage of sick individuals.

The low-cost models for premiums and out-of-pocket expenses favored consumers and attracted new customers.

The attractive terms produced a membership that was sicker than the average population in the service areas. This relative larger share of sick members strained the resources of the fledgling COOPS and their networks.

COOP Legislative Restrictions

The legislation that created the COOPs drew sharp attention from their future competition. The authorizing legislation had some remarkable restrictions that made the startup even more difficult.

The statutory restrictions ordered that there would be no advertising, no private equity capital, and in the past year, no risk corridor guaranties. Against a backdrop of rising costs, the COOPs experienced difficulties and failures.

Opposition to Public Control


The ideal of the COOPs in the Affordable Care Act met the reality of determined political and economic opposition.

The Affordable Care Act had the audacious approach of returning art of the control of the health services industry to the public. It has grown tighter corporate control since the explosion of employer healthcare during World War II.

The control over health care became actuarial and seemed impervious to the human side of the health issue.

The ACA came as much from a desire to have low-cost insurance as the desire to have more humane policies.

In 2008, the sight of children with terminal diseases turned away from coverage seemed cruel and unnecessary by the evolving standards of societal decency.

COOPs had Potential to Change Markets

One price leader can change the dynamics of a local market. In the US, many markets have one health insurance provider, and competition for customers is relatively rare. There are a few markets, mostly large cities, in which several forms vie for customers.

The COOPs were authorized to add competitors, but more than that, they had a potential to add competition. Their mission was not just to provide high-quality care but to deflate prices and help reverse the upward spiral of medical costs.

The COOPs needed risk protection that is no longer available.

The Co-ops and COOPS in Healthcare


Cooperative health insurance has two distinct meanings; it is the traditional beneficiary-owned arrangement, and the ambitious program launched by Obamacare and run by the CMS. The Affordable Care Act sought to reform the insurance industry and invigorate markets with helpful competition.

The program continues with new regulations, and rules that permit outside financing. The performance will determine the merits of the program.

Comparison shopping is the best method for selecting health plans. Comparison shopping can help assess the advantages of the cooperatives that sell on the Marketplace and exchanges.

Find the right health insurance today; enter your zip below to get started with a free, customized health insurance quotes comparison!

  1. https://www.healthcare.gov/glossary/co-op/
  2. http://obamacarefacts.com/insurance-exchange/health-insurance-marketplace/
  3. http://obamacarefacts.com/health-insurance-networks/
  4. http://obamacarefacts.com/hras-fsas-and-employer-healthcare-arrangements/
  5. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/NA-Pilot-Final-Guidance-Clean-093016.pdf
  6. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Insurance-Programs/Consumer-Operated-and-Oriented-Plan-Program.html
  7. http://www.ncsl.org/research/health/purchasing-coops-and-alliances-for-health.aspx
  8. https://www.cms.gov/CCIIO/Resources/Grants/new-loan-program.html
  9. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/CO-OP-Guidance-Manual-7-29-15-final.pdf
  10. http://obamacarefacts.com/pre-existing-conditions/
  11. https://www.cms.gov/cciio/resources/files/downloads/3rs-final-rule.pdf
  12. https://s3.amazonaws.com/public-inspection.federalregister.gov/2016-20896.pdf