Injecting Competition into Health Insurance

1. Injecting Competition into Health Insurance Health Care CO-OPs: The Middle Approach to Health Reform

3. Origin • Origin of CO-OPs is embedded in the Patient Protection and Affordable Care Act (ACA) • Health care CO-OPs were a late addition advocated by Sen. Kent Conrad (D-ND) • CO-OPs are predicated on the same concepts as cooperatives – member-owned and governed organizations formed for the common good of their members

4. Origin • Funded originally with $6 billion (now $3.4) • Designed to inject competition into the health insurance market with the federal government providing the venture capital & start-up costs • CO-OPs were a private sector alternative to the “government option” that was so controversial in the original health care reform legislation

5. Origin • Assigned to HHS (which turned to CMS) to draft CO-OP rules, create bid process for interested organizations, and oversee the program • HHS issued Federal Opportunity Announcement with an initial due date in October 2011 • Plans must be operational by January 1, 2014 • Plans must be made available on Health Care Exchanges and be focused on individual and small-group (<100 employees) markets

6. Origin Many States/Regions contemplating forming a CO-OP in order to: • Provide a viable alternative in the market to dominant carriers in this concentrated market • Take advantage of the funding opportunities embedded in the ACA • Re-create true non-profit health insurance alternative • Form a vehicle for collaboration with providers, agents/brokers, and (above all) consumers • Put consumers back into the health care equation

7. Market Environment • Employers and individuals are terribly frustrated with the never-ending rise in health insurance costs • Few understand the underlying dynamics • Even fewer want to be burdened by it – they just want it fixed • Health care reform legislation, the ACA, won’t • But shaking up the marketplace can set the stage

8. Market Environment • There is too little competition in the market: “Concentrated” insurance markets = unregulated product costs • Iowa is the third most concentrated market in the U.S. • Few options exist in the individual market where highest rate of uninsured exists • The number of small employers offering coverage has been plummeting

9. Market Environment • ACA focuses on individuals & small groups • Formation of Health Care Exchanges provides a new forum for “shopping” for coverage for these purchasers • Tax credits/vouchers + mandate to purchase coverage are designed to virtually eliminate the uninsured & draw people to Exchanges • Small businesses are likely to “dump” people into the individual market

10. Market Environment • The likely result is a more empowered (yet confused) health care purchaser • Large employers are likely to: • continue self-funding • modify benefit packages to conform to Exchange-mandated design and levels • consider whether to abdicate role as insurance buyer (opt to pay penalties rather than see prices rise at indeterminable, yet always growing, rate)

11. CO-OP Opportunities • Fill the need for more competition in individual and, to some degree, the small-group market • Use the Exchanges as a relatively inexpensive vehicle for market entry/distribution point • Change the dynamics of the competitive market by forcing dominant carriers to adapt

12. CO-OP Opportunities • Re-introduce the concept of “true” non-profit, consumer-oriented health insurance featuring low administrative costs, member responsibility, rational use of the health care system • Re-engage polarized players in the system – providers, distributors, health plans, purchasers • Re-set consumer expectations of health insurance • Inject the concept of lowest possible costs with the best possible motives since it is unlikely that Exchanges or even the COOP will noticeably improve price in the short-to-medium term

13. Collaborative Model • Give all stakeholders the right support and incentives to control costs and promote good health -     Members can do their part by committing to healthy lifestyles and real member engagement -     Providers can do their part by focusing on maintaining and restoring quality health care with proper incentives -     Midwest Members Health will do its part by aligning payment incentives and policy design

14. Restore Trust • By restoring trust to the patient/provider/payor relationship: -     Members have complete transparency of information and control of the Board -  Maintaining a true commitment to its non-profit status -     Savings goes back to members and their providers

15. Innovation & Competition • By bringing innovative products and pricing to markets : - where there is no incentive to existing market players to improve choice and provide what individuals and small businesses are asking for - where existing provider leadership can be tapped for innovations like Medical Home and Accountable Care Organizations   - where a unique environment exists for “cooperative” efforts

16. Continuing Risks • Funding Rescission • Negotiating acceptable contract terms/capital with HHS • Litigation/Legislation (Supreme Court case) • Ability to meet State regulatory requirements • Unreasonable Expectations

17. Prospects for Success • If CO-OP can’t work in Iowa, it is unlikely it can work anywhere • This may be the last chance to avoid an oligopoly in health insurance or a government-run system of care – the future of private health care in America may truly be at stake • Success can only be achieved through the collaboration of the CO-OP with other crucial (often disenfranchised) players in the system, most notably providers and consumers

18. The Value Proposition • CO-OP is the last, best opportunity to bring consumers back into the health care equation • CO-OP is dedicated to the principles of affordable health insurance at the lowest price possible while meeting its financial obligations and delivering low administrative costs and consumer centricity • CO-OP will engage members in improving their health while delivering exceptional service through best-in-class processes and organizations