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Kentucky Health Cooperative Insurance, Available in 2014

The Supreme Court Decision of June 28, 2012 upholding the Patient Protection and Affordable Care Act (“PPACA”) in National Federation of Independent Business, et al., v. Sebelius , Secretary of Health and Human Services, et al., reignited the creation and implementation of Consumer Operated and Oriented Plan programs (“CO-OPS”).  CO-OPs are aimed at offering small businesses and individuals more affordable health insurance options, especially in states where there are a few insurance carriers capitalizing the market with plans that are not economically targeted at the smaller insurance market.

Kentucky was awarded a $59 million CO-OP loan from the U.S. Department of Health and Human Services to create the Kentucky Health Cooperative (“KYHC”), which will provide quality health insurance at competitive rates for the targeted small group and individual market.  Kentucky Health Cooperative is a state-wide non-profit entity, directed by its customers, where the profits will be directed toward customer benefits.

Even with the Supreme Court’s blessing, there are still some hurdles for the CO-OP system to overcome. With enrollment open in October 2013 and insurance start dates available January 1, 2014, CO-OPs are under the pressure of a short implementation timeline.  There are many things left to accomplish before CO-OPs become a reality. KYHC is currently working with the Kentucky Department of Insurance on becoming a licensed insurance company in the state, and that is the first step. Once KYHC is established as an insurance company the work to build a provider market begins.  The goals are ambitious and KYHC will have a little over a year to approach providers about the benefits of the CO-OP and garner their participation. Providers are accustomed to shopping in a competitive insurance market, however, the CO-OP member pool will be in the infancy stages with any kind of statistical leverage.  Thus, the pitch will rely on a clear explanation of the vision and purpose of the CO-OP  and hopes that providers buy-in to the Affordable Insurance Exchange system.

Marketing to the consumer population at-large, to attract members will also be challenging even with a significant pool of uninsured or underinsured people documented, but a more significant hurdle may be paying for the marketing.  Using funds from Centers for Medicare and Medicaid Services (“CMS”) is prohibited, so private funds will be necessary to “advertise” and make the general population aware of KYHC, its benefits and plans.  CMS will closely monitor every CO-OP to ensure proper use of funds and to make sure they are all meeting the goals and target dates of implementation.  This of course is necessary to safeguard the loan repayment.

Even with numerous hurdles to overcome KYHC seems to be on track and moving forward with their formation.  We will be watching their progress closely, and continue to keep you informed about CO-OPs and State Insurance Exchange developments.

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This article does not constitute legal advice.

Lexington, KYLouisville, KYFrankfort, KY: MML&K Government SolutionsWashington, D.C.