Consumer-run health insurers receive devastating cuts in fiscal cliff

Plans to create consumer-run health insurers in almost every state in the USA have been scrapped due to cuts of $1.4 billion in the fiscal cliff passed on 1 January.

In March 2010, the Affordable Care Act made plans to establish Consumer Operated and Orientated Plans (CO-OPs), non-profit health insurers, in every state by 2014 but cuts mean only 24 states will benefit.

Originally $6 billion was set aside for the venture, later reduced to $3.8 billion by Congress. 24 CO-OPs have already received funding of more than $2 billion, but with cuts of $1.4 billion no more CO-OPs can be created – meaning many US consumers will not have access to consumer-owned health insurance.

The CO-OPs are consumer-owned, though not all of them work as co-operatives. The minimum requirement of the Affordable Care Act is that the CO-OPs must have a board made up of and elected by their members and work on a non-profit basis.

The National Business Cooperative Association supports the CO-OPs and advocated they should run as much like co-ops as possible – especially in their governance structure.

Many of the 24 funded CO-OPs see these cuts as a devastating blow and worry that lack of competition will create higher premiums for consumers.

Larry Turney is the Chief Internal Officer for Montana Health Co-operative. He believes those states which do not have a funded CO-OP will be at a “great disadvantage” and every state deserves the opportunity to have a CO-OP.

Terry Shilling from Louisiana Health Co-operative Inc, said: “Less competition usually results in higher premium rates for members, and especially those who would be served by the co-operative, small group employers and individuals and the working uninsured.”

Janie Miller, the CEO of Kentucky Health Co-operative (KYHC) and former Secretary of the Cabinet for Health and Family Services, explained: “KYHC is very disappointed that the citizens of many other states will not have the opportunity to participate in health co-operatives… it’s extremely disappointing that these groups who are very vulnerable to premium costs increases will not have coverage from a health co-operative in many states because of the funding cuts.”

The CO-OPs are non-profit, therefore all the money goes back into the CO-OP.

Leigh McGivern, from CoOportunity Health explained: “We intend to engage consumers both in their own health, but also in the organization, the way co-operatives always have in other industries.”

Larry Turney added: “Unlike our competitors, once in operation, profits will be returned to members either in the form of refunds, premium reductions or expanded benefits.”

Currently no state-level CO-OPs are fully funded or operational, though many have been using the funding as a start up.

The NCBA said it hopes for the success of these entities as a demonstration of the value of consumer-owned health insurance and is dedicated to supporting the 24 CO-OPs, hoping they will lead to the formation of co-operatively owned health insurance entities in coming years.