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CMS Oversight Must Continue Because All Remaining Consumer Operated and Oriented Plans Were Not Profitable and May Not Be Viable and Sustainable

Several of the Consumer Operated and Oriented Plans (CO-OPs) that were operating at the beginning of 2016 are no longer viable or sustainable. Specifically, 5 of the 11 CO-OPs operating on January 1, 2016, had ceased or planned to cease operations by the end of the 2016 plan year, and each of the remaining 6 CO-OPs reported net losses and had drawn down nearly all available CO-OP loan amounts as of December 31, 2016. These six operational CO-OPs did not appear to be financially viable and sustainable based on the reported net income and available capital and surplus. When a CO-OP ceases operations during the plan year, health plan participants can be significantly affected.

In 2015 and 2016, the Centers for Medicare & Medicaid Services (CMS) placed 10 of the 11 CO-OPs on a corrective action plan or an enhanced oversight plan because of financial, operational, or market strategy concerns. CMS conducted the required oversight of the CO-OP program, but this did not prevent the CO-OPs from ceasing or planning to cease operations. Although oversight of CO-OPs is primarily a State responsibility, CMS continued to monitor the closed CO-OPs in an effort to help State regulators manage the wind-down and liquidation process and to help the U.S. Department of Justice recover any funds that may be available to repay startup and solvency loan debt.

We recommended that CMS (1) continue to work with operational CO-OPs to improve their financial condition; (2) continue the use of corrective action and enhanced oversight plans, especially for those CO-OPs with net losses and no remaining CO-OP loan funds to be drawn down; and (3) continue to work with States to ensure that CO-OP plan participants receive continuous coverage and access to plan providers and services. CMS agreed with our recommendations and listed actions it would continue to take to address our recommendations.

Filed under: Centers for Medicare and Medicaid Services