The CO-OP Health Insurance Program

Twenty-three "consumer operated and oriented plans" are offering coverage through health insurance exchanges.

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Early evidence is that the CO-OPs have proposed premium rates that are very competitive.

Since October 2013, people without access to coverage through an employer, Medicaid, or the Children’s Health Insurance Program have been able to purchase health plans through health insurance exchanges for coverage taking effect in 2014. These new marketplaces are one of the Affordable Care Act’s (ACA’s) key mechanisms for expanding coverage.

Recognizing that in some states only a small number of insurance companies offer coverage for individuals and small businesses, the health care law also established a Consumer Operated and Oriented Plan (CO-OP) program to increase competition among plans and improve consumer choice. The federal government awarded nearly $2 billion in loans to help create 24 new CO-OPs in 24 states. (One of these has since disbanded. See “Funding” below.) The CO-OP sponsors—consumer-run groups, membership associations, and other nonprofit organizations—are now moving forward
to offer health coverage in competition with established commercial and nonprofit insurance companies.

Many analysts are enthusiastic about the potential for CO-OPs to bring competition and choice to the market. Others question whether the federal loan initiative has been a wise use of taxpayer dollars, since many CO-OPs will be at a disadvantage competing against well-established insurance companies and may fail. This policy brief updates a previous brief on the subject posted February 28, 2013. It describes the current status of the CO-OP program and examines issues related to the likelihood of its success now that the ACA implementation has begun.

The CO-OP program passed the first true test of its viability. All but one of the funded CO-OPs were organized and offering plans on the exchanges in time for enrollment that began on October 1, 2013. The next significant tests will be to see how many CO-OPs were able to enroll enough people and to see if the CO-OPs’ premium rates were realistic enough for them to become sustainable. Evidence will also accumulate about which plans are competing well against their commercial counterparts—for example, by offering integrated care delivery or specialized services. Those CO-OPs that do succeed may offer lessons for other health systems and insurers striving to provide higher-quality care at lower cost.