The Centers for Medicare & Medicaid Services Awarded Consumer Operated and Oriented Plan Program Loans in Accordance With Federal Requirements, and Continued Oversight Is Needed

Starting in 2013, individuals and small businesses will be able to enroll in private health insurance plans through State-based competitive marketplaces called Affordable Insurance Exchanges (marketplaces). To expand the number of health plans available in the marketplaces, the Patient Protection and Affordable Care Act (ACA) established the Consumer Operated and Oriented Plan (CO-OP) program and provided $6 billion in funding for the program. The ACA directed the Secretary of Health and Human Services to provide loans to help establish new consumer-governed, nonprofit health insurance issuers, referred to as CO-OPs, in every State.

We found that CMS awarded CO-OP loans to applicants in accordance with Federal requirements. However, we identified factors that may affect the CO-OP program. Specifically, we found that CO-OPs reported limited private support, and many CO-OPs' budgeted startup expenditures exceeded available funding.

Private support is one of the three selection factors that the ACA specifies will have priority in the selection process; however, we saw little evidence of private monetary support in any of the 16 applications we reviewed. Additionally, 11 of 16 CO-OPs reported estimated startup expenditures in their applications that exceeded the total startup funding ultimately provided by CMS. There is a risk that CO OPs could exhaust all startup loan funding before they are fully operational or before they earn sufficient operating income to be self-supporting. This may affect the CO-OP program in the long term.

We recommended that CMS monitor (1) CO-OPs to ensure startup funds are not exhausted before the CO-OPs become fully operational and (2) CO-OPs' solicitation of additional private monetary support. CMS concurred with our recommendations.

We issued on July 17, 2013, that addresses CMS's early implementation of the Consumer Operated and Oriented Plan loan program.