Thank you for this invitation to testify before the Consumer Operated and Oriented Plan (CO-OP) Program Advisory Board on the Affordable Care Act's CO-OP Program. The Affordable Care Act provides $6 billion in loans and grants for the development of new nonprofit health cooperatives to be sold as qualified health plans through state insurance exchanges and the individual and small-group insurance markets.
The experience of health cooperatives in the United States has demonstrated that the most successful organizations have been those with strong links to high-performing, integrated delivery systems that have been able to provide high-quality integrated and coordinated health care. The Department of Health and Human Services can draw on the experience of successful health cooperatives as it lays the ground rules for the development of a substantial number of new organizations across the country. If these new entities are provided the tools and flexibility necessary to reach sustainable membership levels, attain adequate purchasing leverage in their markets, develop strong links with integrated care systems, manage risk appropriately, and follow a mission-driven roadmap to achieve high-quality and coordinated care, they have the potential to embody the key overarching goals of health reform. These include the delivery of high-quality, effective, and safe care to achieve the best possible health outcomes for populations; the design of care delivery that is in the best interests of patients; and the efficient use of resources.
Key Provisions of the CO-OP Program
- Organizations qualified to participate in the CO-OP program are those that are organized under state law as nonprofit, member corporations.
- Priority will be given to plans that operate on a statewide basis, utilize integrated care models, and have significant private support.
- The governance of the organizations must be subject to a majority vote of its members and the organizations are required to operate with a strong consumer focus, but they are not consumer-owned.
- Profits must be used to lower premiums, improve benefits, or to finance programs aimed at improving the quality of care to its members.
- Any health insurance issuer that existed prior to July 16, 2009 may not qualify for the CO-OP program.
- Grant or loan recipients under the CO-OP program are restricted from using the funds for marketing activities.
- Representatives of federal, state, or local governments as well as representatives of insurance issuers that were in existence on July 16, 2009 cannot serve on cooperative boards.
- Cooperatives may establish private purchasing councils that may enter into collective purchasing arrangements for items and services. But the councils are precluded from setting payment rates for health care facilities or providers that are participating in health insurance coverage provided by the plans.
- The secretary of HHS is precluded from participating in any negotiation between cooperatives, or a purchasing council, and any health care facilities or providers including drug manufacturers, pharmacies, or hospitals. The secretary may not establish pricing structures for reimbursement of health benefits provided by the qualified health plans.
Provisions of the Affordable Care Act Relevant to CO-OPs
- New health cooperatives will enter a vastly different insurance marketplace in 2014 compared with the one that exists currently, and one that is potentially more favorable to them.
- The Affordable Care Act will bring sweeping change to the individual and small-group markets through:
- the establishment of state insurance exchanges that will offer qualified health plans, including health cooperatives;
- an individual requirement to have health insurance;
- new insurance market regulations including prohibition of rating based on health status;
- a federally determined essential benefit package with defined levels of cost-sharing;
- sliding scale premium and cost-sharing credits for low and moderate income families;
- small business tax credits (starting in 2010 and continuing through 2016);
- insurer cost controls such as federal and state review of unreasonable premium increases and medical loss ratio requirements.
State Flexibility in Designing Exchanges Has Implications for Health Cooperatives
- States will have flexibility in designing their exchanges in ways that may reduce the risk of adverse selection against the exchanges, decrease administrative costs, help lower premiums and improve health care quality.
- One of the most significant areas of state discretion from the perspective of the CO-OP program is the degree to which states may exercise additional regulatory authority with respect to the certification of qualified health plans (i.e., whether exchanges are "active" vs. "passive" health plan purchasers).
- States can decide, at one extreme, to certify all plans for participation in the exchange that meet the minimum set of criteria laid out in the law and by HHS. Or, at the other extreme, states may decide to set higher certification standards for health plans to improve quality, lower price, and shift the competitive dynamic among health plans towards value.
- In highly concentrated insurance markets (one or two plans currently dominate more than 50 percent of the market in most states), exchanges may well be positioned to help level the playing field. That is, such a market may enable nonprofit health plans, like new or existing health cooperatives closely linked to high quality integrated delivery systems, to enter the field.
- This ability will depend on the degree to which exchanges are able to capture most of the individual and small-group markets, which will likely evolve over time.
U.S. Models of Successful Health Cooperatives and Nonprofit Integrated Delivery Systems
- The most successful existing examples of regional health cooperatives are those with strong links to high performing integrated care systems: HealthPartners in Minneapolis–Saint Paul and Group Health Cooperative in Seattle.
- Both are nonprofit, consumer-governed organizations that serve more than 500,000 members in broad geographic areas. In addition to insurance, HealthPartners and Group Health directly provide health services through nonprofit integrated delivery systems. The cooperatives own or contract with hospitals and clinics and contract with dedicated multispecialty physician groups.
- Keys to these organizations' success include:
- a consumer-focused mission;
- accountability resulting from a consumer-elected board;
- close links with care systems and networks of providers;
- a regional focus integrating a broad range of services;
- commitment to evidence-based care and informed patient engagement;
- strategic use of electronic health records to support care redesign;
- patient-centered medical home model of primary care;
- efforts at care coordination and greater accountability for the total care of patients;
- lean techniques with care teams and frontline staff;
- a culture of continuous improvement that has included:
- setting ambitious goals for health system transformation,
- measuring what is important for improving patient care,
- agreeing on best practices and supporting improvement at the clinical level,
- aligning payment and other incentives for providers and patients with organizational goals,
- making clinical performance measures for providers and the health plan publicly available.
- Similar successful examples of nonprofit integrated delivery systems with affiliated health plans, though not consumer governed, are Geisinger Health Systems in Pennsylvania, Intermountain Healthcare in Utah, and Kaiser Permanente.
Potential of the CO-OP Program to Spread Models of High Performing Nonprofit Integrated Delivery Systems
- The CO-OP program could spread highly successful models of nonprofit consumer-focused, integrated delivery systems like HealthPartners and Group Health, and similar nonprofit integrated delivery systems with affiliated health plans like Geisinger, Intermountain, and Kaiser Permanente.
- While it may be difficult for new cooperatives to replicate such models in a short period of time, the provisions of the Affordable Care Act are sufficiently flexible to allow health cooperatives to contract with a wide array of high-performing provider organizations to achieve similar goals including:
Contracting with integrated delivery systems. The law precludes existing health plans like the Geisinger Health Plan from serving on the boards of cooperatives receiving grants, but it does not preclude the new cooperatives from contracting with Geisinger's integrated delivery system.
- Through such arrangements, the CO-OP program could help replicate the unique nonprofit collaborative environment of Minneapolis–St. Paul area, where shared clinical practice guidelines, evidence-based care, and physician payment and performance standards among stakeholders have made the region a leader in health delivery innovation. Minnesota ranks in the top five states in the Commonwealth Fund's State Scorecard on the measure of high-performing health systems.
- The CO-OP program has the potential to reinforce the culture and increase the collective market share of these mission-driven organizations in regional markets through contractual arrangements or affiliations.
Contracting with multispecialty group practices, clinics and hospitals, with a goal of integrating care systems. One example is Marshfield Clinic, a nonprofit, multispecialty group practice in rural Wisconsin with a regional ambulatory care system, affiliated health plan, and related foundations supporting health research and education. Marshfield has engaged its physicians and staff in a program of clinical performance improvement aimed at enhancing patient access, coordination of care, and efficiency of clinical operations. Marshfield Clinic sponsors Security Health Plan of Wisconsin, which provides coverage to 150,000 residents in 32 counties through a network of affiliated hospitals and providers, including Marshfield Clinic physicians. The plan is administratively and financially separate from Marshfield.
Contracting with community health center networks. Available in every state, community health centers are linked through a common mission and formally through national organizations, such as the National Association of Community Health Centers. They thus have the potential to become multistate networks. Indeed, every qualified health plan sold through the state exchanges will be required to include essential community providers in their networks. One example of a high-performing, community-based system of care that contracts both with individual and group practices and community health centers is Community Care of North Carolina.
Purchasing Leverage and the Ability of Cooperatives to Compete in Highly Concentrated Insurance Markets
- One of the most significant challenges facing newly formed cooperatives will be their ability to gain market share in highly concentrated insurance markets.
- In most markets, large insurance carriers and provider systems individually negotiate prices that ultimately reflect "discounts" off list prices that physicians and hospitals charge patients without insurance. The discounts tend to vary depending on volume or plan enrollment. Thus, prices vary widely and the lowest rates are not available to all health plans.
- Newly formed cooperatives will be at a considerable disadvantage in obtaining favorable provider rates in most local markets, which will in turn make them less competitive in insurance exchanges and the individual and small-group markets.
- The ability to leverage purchasing power to obtain lower rates has been key to the success of cooperatives in other industries. Rural electric cooperatives, for example, are able to purchase power at cost from power marketing agencies that sell power from federal dams.
- Within the health care industry, successful cooperatives have been linked closely with care systems and networks of providers.
- Karen Davis, president of The Commonwealth Fund, points out that for cooperative health care to slow the growth in health care costs, a cooperative health plan would need the authority to purchase care on favorable terms and the ability to offer high quality networks of providers. Davis identifies at least two possibilities for providing cooperatives such leverage:
- Federal or state governments could guarantee that cooperative health plans are able to obtain the lowest price charged to the most favored customer.
- A national cooperative organization could be given the authority to negotiate provider prices on behalf of all customers.
- In Germany, for example, membership "sickness funds," with trustees representing employers and members, conduct negotiations as a group (i.e., all sickness funds negotiate together) with their regional counterpart provider organizations on behalf of all patients.
- Such a process could be provided to a national "Health Value Authority" and applied to all health plans participating in an insurance exchange, including cooperatives.
- The private purchasing councils are one potential vehicle by which cooperatives might gain purchasing leverage in provider negotiations. But the law precludes the councils from "setting payment rates" for health care facilities or providers that are participating in health insurance coverage provided by the plans. But it is unclear whether the purchasing councils might be allowed to negotiate provider rates. States might want to consider requiring providers to give health cooperatives the lowest prices they give to other private insurers.
- More generally, for cooperatives to succeed, they will need to link to networks of providers that are accountable for providing access, high quality care, and innovations that slow cost growth.
Moving U.S. Health Care Towards High Performing Integrated Care Systems
- The way states elect to implement their exchanges will be critically important, not only for the long term viability of health cooperatives but the ability to move our current fragmented system of health care to a national delivery system that has the mission, values, capacity, operational systems and strategies of high-performing systems like HealthPartners and Group Health.
- Careful attention by federal regulators and the states to use the flexibility allowed them under the law to effectively reduce the potential for adverse selection against the exchange will strengthen the market presence of the exchanges themselves, allowing them to offer plans with competitive premiums.
- This will further enable state exchanges to devise more rigorous criteria for qualified health plans that will help move insurance markets towards an emphasis on high value models of consumer-focused, patient-centered, integrated delivery systems.
- The concept of health cooperatives envisions mission-driven health plans that are accountable to their members and the public interest for providing accessible, high quality, and affordable care. With exchanges and other provisions of the Affordable Care Act, states, with the support of federal legislation, have the potential to hold all plans and care systems accountable to these goals.