If all goes according to the plans of some local health care and business professionals, Kansas Health Cooperative, Inc. would be the first health insurance cooperative in the state under the Affordable Care Act, and the co-op would offer insurance to individuals and small businesses that may have had difficulty getting insurance in the past.
The Affordable Care Act, the federal law that remains politically controversial even after the Supreme Court upheld most of its requirements, contains a provision for the establishment of health care co-ops in all 50 states.
The Consumer Operated and Oriented Plan Program will “foster the creation of qualified nonprofit health insurance issuers to offer competitive health plans in the individual and small group markets,” according to the U.S. Department of Health and Human Services.
So far, no one else in the state has applied to operate such a co-op.
“It is an opportunity to design something from the ground up, provide new competition in the marketplace and to provide insurance to those who are uninsured,” said Anne Nelson, associate executive director for Central Plains Health Care Partnership, an affiliate of the Medical Society of Sedgwick County, which has been leading the charge for the Kansas Health Cooperative, Inc.
The most recent census data show there are an estimated 380,000 uninsured Kansans younger than 65, and 75,000 of those live in Sedgwick County. The burden on small businesses to provide health care coverage for employees can be great: The Department of Health and Human Services estimates that small businesses pay about 18 percent more per person than larger firms for the same health plans.
According to the Kaiser Family Foundation’s latest national survey, premiums have increased over the past year, while the number of companies offering health coverage and the number of employees covered has stayed about the same.
About 61 percent of companies offer health insurance benefits to employees, the study showed, and employer-sponsored insurance covers about 149 million non-elderly people.
The Kansas Health Cooperative will need to get federal approval of its application, due by Oct. 1. to qualify for low-interest federal loans, including a start-up loan in 2013 that must be repaid in five years and a solvency loan in January 2014 that must be repaid in 15 years.
Those that receive federal loans will be required to submit quarterly financial statements and have annual external audits. If approved by the federal government, the co-ops could hire staff and begin offering coverage on Jan. 1, 2014.
The size of loans required for the Kansas cooperative has not been determined, Nelson said. But 20 other states’ nonprofit co-ops have received between $33 million and $175 million each so far, totaling $1.56 billion, according to Health and Human Services.
“You need a ton of money to have reserves to pay off claims,” said Tim Witsman, president of the Wichita Independent Business Association, who is among those working with Kansas Grantmakers in Health to create the co-op.
Kansas Insurance Commissioner Sandy Praeger thinks the group’s connections to the Medical Society of Sedgwick County give it an advantage in the application process.
“I think we have an opportunity going forward to create a more competitive environment,” Praeger said of the co-op. “The concept there is, if it’s consumer owned and operated, some efficiencies can put pressure on the for-profit companies.”
How it works
The co-op would be consumer-driven and operate much like a credit union or farming co-op run for and by its members, Nelson said. It would offer at least three coverage options, and individuals would be able to use online resources to compare plans within the co-op and with other private insurance providers.
“The idea is that we’d like to provide coverage for individuals and small businesses,” Witsman said. “It doesn’t mean we can’t take larger companies, but we’d be limited to how many we can have if we’re in the small-business market. It will be statewide.”
The group has been working with Praeger’s staff to make sure it is meeting regulations and requirements of the federal process. It would also face the same regulatory expectations as licensed insurance companies in the state. So far, the effort has included work done by actuaries, administrators and grant writers.
How many Kansans would sign up is unclear. Witsman declined to give estimates because he said it could put the co-op at a competitive disadvantage.
“It’s not a huge share of the Kansas market, but a significant number,” Witsman said.
The co-op also will stress health care more than insurance, he said.
“Our focus is not so much on the insurance but more on the health side, trying to make people healthier through more contact and intervention, working hard on folks with chronic diseases, making sure they do the right things. The idea is to provide better health results, which over the long run, should lower costs,” he said.
Incorporated in August, the co-op will have its own staff and board of directors.
Witsman said two-thirds of the board would be members who buy insurance through the co-op, “not some group of people 1,000 miles away making decisions for you.”
Kansas Health Cooperative, Inc. would use another medical society affiliate, ProviDRs Care as its statewide providers network. ProviDRs Care Chief Operating Officer Karen Cox said the network includes more than 4,500 physicians and practitioners and about 144 hospitals statewide.
Cox said their network is the only physician-owned network in the state and one of a few in the country.
Under the current law, each state is required to operate a health care exchange, which are new entities intended to provide consumers an organized way to find health insurance that meets their needs and budgets.
The exchanges are supposed to be up and running by 2014, but Gov. Sam Brownback hasn’t moved to set up an exchange for Kansas, saying that if fellow Republican Mitt Romney is elected, the mandate will be dropped.
But if President Barack Obama is re-elected, the act will remain in place, and Kansas will have to present a blueprint for its exchange to the federal government by Nov. 16 or fall under a federal exchange. Praeger’s office is continuing to plan for the deadline in case the state decides to set up its own exchange following the results of the November election, but she thinks it is unlikely.
“We would be able to have a lot more control over the process if we had a state exchange or even if we had partnership under the Feds,” Praeger said, because then Kansas would determine criteria for the plans that are offered in the state.
“We would be much more in control of our destiny if we were a state exchange, but that opportunity has really passed us by,” she said. “I don’t think we have the ability to get the technology up and running by that time.”
Last year, Brownback returned a $31.5 million federal grant to help set up the computer infrastructure for a Kansas exchange.
Some states have, like Kansas, delayed setting up health care exchanges, while others said they would move ahead even if Romney wins in November.
Praeger said Romney has suggested the implementation of some of the current parts of the Affordable Care Act, including the option of exchanges, but nothing is known for sure.
“It would probably be highly unlikely Kansas would pursue an exchange if we didn’t have the federal law in place,” Praeger said.
Regardless of the election’s outcome, Nelson said the co-op could work – be it through a state or federal health care exchange or as an independent insurance company.
“We plan to be included in the exchange if there is one, but we’ve planned marketing strategies for outside the exchange, too,” she said. “There is no way to predict who will win the election and what happens with the Affordable Care Act.”
The co-ops are organized under a new IRS designation of 501(c)(29) Qualified Nonprofit Health Insurance Issuers.
To qualify, the programs have to receive a loan or repayable grant under the program; net earnings cannot benefit any private shareholder or individual except to “lower premiums, improve benefits or improve the quality of health care delivered to its members”; and the co-ops cannot attempt to influence legislation or participate in political campaigns.