The Failure Of CO-OP Program Raises Concerns For CMS

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Consumer Operated And Oriented Plan

A recent report released by the House Energy and Commerce Committee stresses on the failures of Consumer Operated and Oriented Plan (CO-OP) program from CMS. The non-profit startup insurers, CO-OPs were introduced by the CMS in order to compete with established insurance companies in insurance exchanges.

This program was authorized under the Affordable Care Act, and as part of their efforts to increase the completion and choice in the marketplace, ACA collected billions through startup and solvency loans, which were available to the CO-OPs. However, this initiative from CMS has not been profitable since 2015.

Many insurers have left the program, removing many of their beneficiaries out of their coverage, which in turn, forced many of them to look for new coverage. This also prevented providers from collecting the claims, which were submitted before the failure of the program.

The CO-OP from New Jersey failed earlier this month to become the 17th failed plan in the line. However, Maryland CO-OP found a way to resolve the issue and requested approval from the state and federal agencies to continue functioning, and convert from a non-profit organization to a profit organization.

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House Energy And Commerce Committee

This strategy from Maryland CO-OP might attract other private equity investors, who are ready to let insurers keep their doors open. However, if state and federal agencies ruled against the request from Maryland CO-OP, then they will also be added into the list of failed CO-OPs.

Besides that, CMS earlier announced a considerable shortfall in one of their risk adjustment programs, which was initially developed to stabilize the markets. This shortfall had a major impact on many of the CO-OPs and they had to suffer enormous losses. However, a few of the CO-OPs managed to remain profitable despite the shortfall, though they were forced to pay a significant portion of their profits to the fund, which eventually resulted in the loss of almost a million dollars.

The House Energy and Commerce Committee also highlighted various recommendations to combat these issues. They asked CMS to monitor the remaining CO-OPs carefully, and excuse individuals who lost their coverage under the failed CO-OP programs from paying individual mandate penalty. The committee also asked to alter the risk adjustment payments and to authorize transparency in the administration of the risk corridor program.