The Vermont Health CO-OP said it will be owned and governed by members and fill a niche envisioned in the Patient Protection and Affordable Care Act of 2010.
"We believe the Vermont Health CO-OP will play an important role in health care reform and is a perfect fit for Vermont's culture and rich heritage of cooperative endeavors," said Mitchell Fleischer, chairman of the CO-OP's founding board of directors.
The CO-OP uses capital letters in its name because it's the short form of co-operative — a business like a food co-op that is owned and governed by members — and an acronym standing for Consumer Operated and Oriented Plan, as called for under the federal Affordable Care Act.
After backers of a government-run public option health insurance program failed to get that included in the federal law, a compromise was reached in which the law ended up calling for the creation of new cooperative or nonprofit health insurance carriers in each state, to compete with commercial carriers. It also set up a loan program to get those businesses off the ground.
Under the federal law, any profits earned by the CO-OP must be used to lower premiums, improve benefits or pay for programs to improve health care quality.
Timed with the announcement of the Vermont CO-OP's creation on Friday, the federal Department of Health and Human Services announced that it was providing a nearly $6.3 million start-up loan for the new entity, to be paid back in five years, as well as a more than $27.5 million loan to enable it to set up a solvency fund. Health insurance companies must keep such funds on hand in case medical claims exceed premiums in a given year. The solvency fund loan is to be paid back in 15 years, officials said.
Fleischer said the CO-OP would apply immediately for a state insurance license and expected to be ready to offer health insurance coverage by October of 2013, a couple of months ahead of January of 2014. That's the date set by the federal law and a Vermont health care law passed last year as the beginning of operations for a new health care exchange. The Web-based, state regulated marketplace will allow consumers to do online comparison shopping for health insurance by comparing costs and benefits offered.
Officials said the CO-OP would be one of the entities offering health insurance coverage through the exchange.