Feds terminate loan agreement with Vermont Health CO-OP

Christine Oliver. Photo by Andrew Stein

Christine Oliver. Photo by Andrew Stein

The federal government pulled the plug on the Vermont Health CO-OP on Monday.

The Centers for Medicare and Medicaid Services notified the CO-OP on Monday that termination of its agreement with the South Burlington-based company is effective immediately. The CO-OP must return any unused funds to the government as soon as possible. CMS made $4.5 million available to the CO-OP for startup costs and $9.8 million for reserves. The feds stopped making additional loan disbursements to the company in May.

The CO-OP’s directors responded to the news by voting to dissolve the company, according to a statement from Christine Oliver, the CEO of the company. Oliver says the Co-op will close by the end of the month. Twelve workers will be laid off.

“Without the financial support of our federal partners, it will not be possible to offer Vermonters the member-owned and member-governed health insurance option that will be available to Americans in many other states,” Oliver said in a statement.

CMS determined that the CO-OP would not be able to participate in Vermont’s exchange under the Affordable Care Act because of ongoing uncertainty about whether it could obtain a state license to operate in time for the state’s health care exchange.

“Unfortunately, without regulatory guidance and policy support from state government, there’s little justification for federal taxpayers to continue to loan the CO-OP the resources to complete the startup phase of this enterprise,” Oliver said.

The exchange market opens Oct. 1, and by Jan. 1, 2014, all uninsured individuals and employees of businesses with fewer than 50 workers must buy insurance on the exchange.

Now that the CO-OP is out of the picture, Vermonters in this group have just two insurers to choose from: Blue Cross Blue Shield of Vermont and MVP.

James T. Kerr, deputy director for the Center for Consumer Information and Insurance Oversight, wrote in a memo that the Vermont Department of Financial Regulation Commissioner Susan Donegan’s decision “to take no action on your request for further review and/or reconsideration renders VHC unable to meet the terms of the agreement.”

Vermont’s plans for single-payer health care in 2017 limit the amount of time the CO-OP could sell insurance and repay CMS for the loans, Kerr wrote.

“As a result of the Insurance Commissioner’s decision, and the underlying realities of the Vermont marketplace relevant to your proposed revised business plan, the project faces insurmountable obstacles to achieving one or more critical milestones in the Agreement,” Kerr wrote.

The CO-OP’s problems started when Donegan denied the CO-OP a license to operate in the state. She determined that the Co-op’s projected sales and income were overstated. She also cited conflict of interest issues and unusually high compensation for one of the organization’s board members as factors in her decision.

Donegan’s order was issued long after CMS had accepted the CO-OP’s application for $33 million in loans in 2012.

Anne Galloway

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