The Patient Protection and Affordable Care Act set up loads of new funds and programs to insure more Americans affordably. One of those was a $6 billion allotment for non-profit health insurance companies called Consumer Operated and Oriented Plans, or CO-OPs.
The idea was that having consumer-governed, non-profit health plans would result in less overhead, and all profits would be funneled back into the CO-OP to lower premiums, expand benefits or secure cash reserves. For such a large federal program, the only time CO-OPs received less media attention than their birth was their death early this year.
Startup and capital loans from HHS were intended to set up CO-OPs in each state, but just 24 proposed plans received federal funding before a deal to avert the "fiscal cliff" was passed by Congress in early January that cut the remaining $2.3 billion from allotted funds. The 24 approved CO-OPs will still operate and keep their funding, but for the rest that were still applying or waiting for approval have little chance of taking off without hundreds of millions in startup capital from other sources.
Illinois' Land of Lincoln Health was the last CO-OP proposal to be approved for funding from HHS, earning a $145 million loan to fill its cash reserves and a $15 million startup loan.
"We are a startup, but we're not a startup in search of capital," says Land of Lincoln Chairman Kevin Scanlan.
Assembling its executive team. Mr. Scanlan, who is also president and CEO of the Metropolitan Chicago Healthcare Council, said the company has named three executives and is expecting its fourth to confirm in the coming weeks. Many of them have ties to the MCHC and will serve dual roles while getting Land of Lincoln launched.
The CO-OP assigned its CEO post to Daniel Yunker, senior vice president of MCHC, who will serve both roles simultaneously. Dennis Rizzo, MCHC's vice president of finance and operations, will serve concurrently as Land of Lincoln's CFO. Monica Katz, also on MCHC staff as director of the council's employee benefit plan, will leave her former position to become Land of Lincoln's vice president of operations, partnerships and member experience full time. Jason Montrie, the only outsider to the group, was appointed vice president of channel and network development, having previously served as a senior sales executive at Humana.
The CO-OP named Bill Donahue, an insurance executive who's held leadership positions at New York Life and UnitedHealthcare, as its interim president.
Building a membership base. Mr. Scanlan says Land of Lincoln will offer plans on the online health insurance marketplace established in Illinois under the health law, which are geared toward individuals and small businesses to purchase approved plans. Those exchanges open for enrollment in October, giving Land of Lincoln about seven months to establish what some other CO-OPs have already spent more than a year building.
"We'd deem ourselves successful with 20,000 lives insured. We'd deem ourselves really successful with 40,000 lives. And since there're 1.9 million people in Illinois that are uninsured, there's a big market out there," Mr. Scanlan says.
In addition to the state exchanges, various privately-run insurance exchanges have begun to pop up that market plans to larger businesses as well. Mr. Scanlan has said his organization has been in talks about the potential to offer plans on these private exchanges as well.
As Land of Lincoln designs its plans to peddle to potential members, he says he's booking his schedule with plenty of speaking engagements hoping to court small businesses that will be mandated under the health law to offer employees health plans by next year or pay a fine.
"There's a lot of misinformation, and a lot of lack of information, especially in that small employer and consumer group. For smaller employers in that under 50 employee group, we've got to educate those companies," he says.
Developing provider networks. "You got to have the networks for people to sign up for," Mr. Scanlan says. To keep plan offerings affordable for their target market across the whole state, it's important to strike the right balance of network providers.
"Illinois' Blue Cross Blue Shield PPO network, I believe, has virtually every hospital in metro-Chicago as a provider. There's a cost inherent in having that many providers," Mr. Scanlan says.
"We're exploring the feasibility of narrower networks, because when you have a narrower network, you presumably have more administrative overhead cost savings. And because we are a mutual, the lower we can make the administrative cost, the lower we can make the premiums. But if members want more choice, more flexibility, we'll explore that. We're asking, do you need a network with 90 hospitals, or will 20 options suffice?"
That's complicated by the need to offer enough options statewide for residents downstate, not just in Chicagoland. "Just because of Illinois' large geography, we're going to need large provider networks or subsets of a large network. Illinois is big state, so we need to have hospitals for members throughout the state. Many will come from urban or metro areas, but not just Chicagoland," he says.
And they'll need out-of-network and out-of-state options will have to be included too in order to be a viable option for many members who want coverage while traveling.
More Articles on Health Insurance CO-OPs:
Where Do CO-OPs Go From Here? Q&A With National CO-OP Director Janice VanRiper
Did the Fiscal Cliff-SGR Bill Rob Hospitals?
The Benefits and Challenges of CO-OPs: Where Do They Fit in Healthcare Reform?