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Co-op Advocates Cry Foul Over Cliff Measure Cuts

By Dena Bunis, CQ HealthBeat Managing Editor

January 3, 2013 -- Advocates for health insurance cooperatives recently slammed the fiscal cliff deal's inclusion of severe cuts to the loan program that would help fledgling programs get off the ground.

The fiscal cliff measure, which President Barack Obama signed into law late last week, eliminates loan funding for any new co-ops, says the National Alliance of State Health CO-OPs, the trade association for cooperatives. The co-op program was included in the 2010 health care overhaul.

According to a statement from the group, the cliff deal "also creates a contingency program to support the development of existing co-ops, equal to 10 percent of the funds remaining for co-op loans. The 24 health insurance co-ops that have already signed loan agreements totaling nearly $2 billion will not be affected by the legislation and will continue to move forward in developing high-quality and low-cost health insurance plans in their respective states."

But by almost wiping out the $1.4 billion that remains in the health care law's fund for these new customer-owned health plans and not funding any new cooperatives, it makes it unlikely that the provision in a federal unveiled last month that calls for a co-op to be established in every state will be fulfilled.

Skeptics have questioned whether these nonprofit entities could be financially viable, and especially wonder they would be able to have the capital to compete against the major commercial insurance companies. But supporters insist they are needed as a check to those big companies in the new health exchanges mandated by the overhaul.

"Since long before the fiscal cliff agreement, the big health insurance companies have fought the new co-ops because they represent a real opportunity to lower health insurance premiums and allow consumers to belong to a member-governed heath insurer," co-op alliance President John Morrison said in a statement. "This fiscal cliff agreement gives the health insurance giants their wish, torpedoing co-ops in the 26 states where they are not yet approved. The cut to the co-op program was not about federal spending since its impact, as CBO confirms, will be minimal to the federal budget; it was about the health insurance giants attempting to eliminate competition at the expense of millions of Americans who will pay higher premiums due to a lack of competition."

The advocates also said the spending reduction math in this case does not add up.

According to Morrison, the Congressional Budget Office estimates that the cuts to the co-op program would reduce spending outlays by only $200 million, while removing $2.3 billion of budget authority.

This isn't the first time this loan fund has been tapped for spending reductions. Initially the health care law (PL 111-148, PL 111-152) allocated $6 billion to help jump-start these plans. But in 2011 Congress cut the fund to $3.4 billion.

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