Vermont Health Co-op takes shape in the shadow of the ACA exchange

Christine Oliver. Photo by Andrew Stein

A Vermont-based, member-owned cooperative is taking strides to becoming one of three chief health insurers in the state. But it’s not there yet.

The nonprofit Vermont Health CO-OP, or Consumer Operated and Oriented Plan, unveiled its new South Burlington headquarters on Tuesday, as it enters into the state’s application process to become a certified health insurer. In attendance at the opening of the CO-OP offices were Gov. Peter Shumlin, Rep. Peter Welch, and other federal and state lawmakers.

Earlier this summer, the CO-OP was awarded roughly $33.8 million in federal loans, which were set aside under the Affordable Care Act. About $6.8 million of that money was available for startup costs, including salaries and a lease on the 7,742 square-foot office space. The other $27 million is being paid incrementally to establish the company’s reserves. The CO-OP is one of 23 groups nationwide and four in New England to receive this type of loan from the Centers for Medicaid and Medicare Services.

If the company is approved by the state, CEO Christine Oliver said it would be the only Vermont health insurer owned and governed by the people it covers.

Steve Kimbell, commissioner of the Department of Financial Regulation, said that the CO-OP recently received federal approval, and its executives just submitted an application for state licensure last week.

“They got a surplus note from the federal government to constitute their reserves,” he said. “An insurance company has to have reserves and that’s what the surplus note represents. That’s a big step for them. But an equally big step is to get a license to function as an insurance company in the state of Vermont, and that’s my department’s concern.”

Kimbell said the length of the approval process would likely be a matter of months, but it depends on the thoroughness of the application and “how well they did their homework.”

CO-OP executives hope to have approval before then so they can offer plans on the Vermont Health Benefit Exchange, called Vermont Health Connect, when it opens for business on Oct. 1, 2013. Oliver said the nonprofit would provide plans for all six of the exchange’s core actuarial levels and possibly some other choice plans.

Having state authorization before the exchange opens is crucial, said Oliver, because it gives the CO-OP the competitive edge it needs to enter the state’s health insurance industry. When 80,000 Vermonters are officially required to enter the exchange on Jan. 1, 2014, those individuals will need to choose new health care plans.

If the CO-OP has plans on the exchange, she said, Vermonters might spring for an option that is Vermont-based — instead of the plans that will be provided by Blue Cross Blue Shield and MVP Health Care — because they have to purchase new plans as it is.

Keeping the money in Vermont

Oliver took on the role of CEO for the CO-OP at the end of August after previously serving as the commissioner of the Vermont Department of Mental Health and the deputy secretary of the Agency of Human Services.

“This is such an opportunity to make a difference, and that’s why I was in state government in the first place,” she said. “All the stars are aligned: We have federal support; we have health reform at the forefront, and Vermonters are ready for something new.”

Oliver said that CO-OP members would have a say over how the organization is run, and if there were a premium windfall, members would get the money instead of company’s executives.

“It is not somebody deciding what you should do with your health care or what to do with the company, you will decide. What services do you want the company to offer in addition to the ones we have to offer?” she said.

“If we are off on the premium calculation, and there’s a windfall, it goes back to consumers. It doesn’t sit in reserves somewhere for the benefit of someone else.”

Asked on Tuesday how the CO-OP would fit into the Shumlin administration’s vision for a single-payer system, she said, “If we get to that system, the CO-OP will figure out how to be relevant in that system. And if we don’t, we’ll close the doors and walk away.”

Oliver wasn’t sure how the company’s premiums would compare to the other two insurance companies on the exchange, but she said the CO-OP would keep money in Vermont’s economy.

“We’ll be locally owned and operated with any savings going back to those Vermonters who do all of their money exchange in the economy,” she said. “It’s the trickle down effect; we’ll do everything locally we can possibly do.”

Shumlin said that while he cannot actively advocate for a particular group to obtain state licensure, he said that he likes the CO-OP’s concept of keeping dollars in Vermont.

“What a cooperative like this would do is spend our health care dollars on health care, not on out-of-state insurance company profits, recycling those dollars in the system,” he said. “So when businesses and individuals go to the exchange and buy health insurance, every dollar stays in Vermont and helps us design a delivery system that costs less for better outcomes.”

Welch also supports the CO-OP.

“Having a CO-OP where all of us are in it together and those profits can be recycled either in the form of lower premiums or better services, that makes sense,” he said. “The biggest asset that we have is keeping our dollars here in Vermont … we have met our ally and it is us.

“This is not a top-down Washington solution,” he added. “This is a bottom-up, Vermonter-led approach to taking a hold of our future.”

Correction: Christine Oliver was the former deputy secretary of the Agency of Human Services.