The Vermont insurance market may have a new kid on the block if state regulators approve a member-owned and -governed health insurance cooperative.
Mitch Fleischer, president of the brokerage and advisory firm Fleischer Jacobs Group, announced Friday that a new nonprofit called the Consumer Health Coalition of Vermont has received more than $30 million in loans from the U.S. Department of Health and Human Services to start a new health insurance model in the state.
The “Vermont Health CO-OP” plans to sell insurance to individuals and small groups on the state’s health benefits exchange that is set to start up in 2014. Co-op members will own and govern the company.
Fleischer said one of the main advantages to the nonprofit co-op model is that consumers will have a say in the direction, goals and governance of the organization.
“At the end of the day, this will be a member-managed company,” Fleischer said.
If all goes well, the group would start offering plans in fall 2013 to be sold on the exchange in 2014. The group also hopes to sell insurance to large businesses that employ 50 or more employees. Those plans will be sold outside the exchange.
The group has already begun working with Vermont Managed Care, which is owned by Fletcher Allen Health Care, to work as the company’s health care provider
The Department of Financial Regulation still must approve it as a licensed insurer.
How the co-op will fit into the health insurance market is not yet clear.
Robin Lunge, director of health care reform for the Shumlin administration, said a co-op could fit well in Vermont, but she could not speak to the specifics of the Vermont Health CO-OP given the pending regulatory review by the Department of Financial Regulation.
“My view on co-ops is they could be a good addition to Vermont’s insurance industry,” she said. “But they will need to meet Vermont standards like any other Vermont insurer.”
In July 2011 when members of the group learned about the provision in the Affordable Care Act that allowed for this type of organization. They applied for funding in January and were approved in June but held off announcing their plans until the feds issued a statement earlier Friday.
The founding board of directors, which Fleischer chairs along with prominent representatives of the business community, health care representatives and a former commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration (now the Department of Financial Regulation). The group plans to replace this board with a permanent operational board elected by members within two years after it issues its first policies.
So why would representatives of business and insurance brokers, often critics of health care reform in the state, want to take the bull by the horns?
Part of it is the money, Fleischer admits.
“I don’t think anyone would have embarked on this by themselves without the solvency loans,” he said.
In a written Q & A offered at a press conference Friday, the group says it hopes to be able to offer more affordable plans for its customers than existing insurance companies and allow members to save money if they are healthier.
“Our plans will be smart designs that give consumers positive incentives to get healthy and use health care wisely,” the pamphlet reads.
Fleischer said the group has received assurance that the dedicated loan funds from the Department of Health and Human Services will continues regardless of the outcomes of the Supreme Court decision on the Affordable Care Act.
The Consumer-Oriented and Operated Plans (CO-OPs) were created in the federal health care law as a sort of replacement for the public option, where government would compete with private health insurers in the exchange — the online marketplace where individuals and small groups can purchase their health insurance in 2014.
Under the federal law, the U.S. Department of Health and Human Services is charged with designating at least one CO-OP in each state. The loan to the Vermont program will provide funding for the 18-month start-up period for the new nonprofit as well as a solvency fund. Of the $33.8 million loan, more than $6 million will go to “start-up,” and about $27.5 million will go to the cash reserve “solvency fund.” The company will have to pay back the start-up loan within five years and the solvency loan within 15 years.
The U.S. Supreme Court is expected to rule on a case challenging the constitutionality of the Affordable Care Act next week. The millions of dollars in loan money heading to Vermont are already allocated and won’t be taken away, Fleischer said.
