CMS rule frees up struggling insurance co-ops to seek private capital

The Centers for Medicare and Medicaid Services is lifting former restrictions and will allow the struggling Affordable Care Act co-ops to obtain needed private capital.

CMS released the interim final rule on May 6 and will allow comments through July 5.

Since federal funding for the co-ops is no longer available, the interim final rule allows co-ops to have greater flexibility for private market transactions to access to needed capital.

The Affordable Care Act established 23 nonprofit Consumer Operated and Oriented Plans, or co-ops, to give consumers more choice in the marketplace. The original appropriation of $6 billion dwindled as $4.9 billion was subsequently rescinded, CMS said. 

[Also: Maine Community Health Options, the only profitable co-op in 2014, posts major losses]

The co-ops found the same financial challenges as private plans: beneficiaries who were sicker than expected; and pricing, among other difficulties. Twelve have closed.

The amendment will also permit a co-op to recruit potential directors from a broader pool of qualified candidates, CMS said.

"These changes will provide co-ops with flexibility common among private market health insurance issuers, and will support the financial viability of co-ops, while at the same time maintaining the fundamental member-governed, member-focused nature of the co-op program, and enabling co-ops to continue to benefit their enrollees," CMS said.

[Also: 2016 seen as critical year for insurance co-ops as Senate subcommittee presses CMS on failures]

The interim final rule also amends eligibility requirements for special enrollment periods.

For individuals who move and want a health plan, the interim final rule requires that they have minimum essential coverage prior to their permanent move for one or more days in the 60 days preceding the date of the move.

This change was made after many stakeholders raised concerns that allowing for a special enrollment period based on a permanent move had the potential to destabilize the health insurance market if people moved solely for the purpose of gaining health coverage, CMS said.

Earlier this year, CMS required consumers who sign up for health insurance coverage during special enrollment periods to submit proof of eligibility, a move the health insurance industry applauded.

This interim final rule does not alter the eligibility for special enrollment periods: those being released from incarceration;  those moving to the United States from abroad as long as they seek to enroll within 60 days; or those who previously were in a non-Medicaid expansion State and ineligible for advance payments of the premium tax credit because of a household income below 100 percent of the federal poverty level.

Twitter: @SusanJMorse