Vermonters could soon have another choice for health insurance.
That’s the goal of a newly created Vermont health cooperative. The non-profit announced Friday that it won nearly $34 million in low-cost federal loans to capitalize the new insurance venture.
The federal money was made available through the 2010 federal health reform law
Mitchell Fleischer is the chairman of the co-op’s founding board of directors. He says the insurance carrier should be up and running by October of next year, just before the state launches its new on-line insurance marketplace.
Fleischer says the organization will be member-owned and that any profits will be used to expand coverage or lower premiums.
"It’s a consumer-run business. It’s like your food co-op, your electric co-op, your housing co-op," he says. "The people covered by the insurance are the people who run the company.’
As Fleischer announced the creation of the health insurance cooperative at a Burlington news conference, the federal Department of Health and Human Services announced it had awarded the new venture $33.8 million in low-cost loans.
About $6 million will cover start-up costs, and $27.5 million is allocated for cash reserves to cover claims.
Health co-ops were made possible under the federal Affordable Care Act. The mechanism was written into the law as a compromise after backers of a government-run public option failed to win enough support in Congress.
The Vermont health insurance market is now dominated by two main players. And Fleischer, who runs an employee benefits company, says the co-op should offer needed competition.
"This brings a different dynamic to the marketplace," he says. "And I think, for the citizens of Vermont, having another choice is critical at this point. I mean, why wouldn’t somebody want to have more choices?"
The Vermont Health CO-OP uses capital letters in its official title because the acronym stands for a "Consumer Operated and Oriented Plan," as called for in the federal Affordable Care Act.
The co-op plans to pay doctors and hospitals differently than most insurance companies by moving away from the traditional fee-for-service model, to one based on sharing the financial risk with providers. Fleischer says that concept fits with both federal and state health reform efforts.
Fleischer says the co-op is working with Vermont Managed Care, a network of health care providers, on a risk-sharing financial agreement.
"The health care delivery and health care quality improvements are extremely important in this endeavor," he says. "The co-op can’t just sell insurance. We have to be a reform leader, which is why the partnership with Vermont Managed Care is so important."
State officials say the co-op’s goal to change how health care is paid for fits well with Governor Peter Shumlin’s reform plans. But Commissioner of Financial Regulation Steve Kimbell says eventually the Shumlin Administration wants to move to a single payer system, where one entity manages claims in the state.
"Short term, that is as the exchange kicks off, this (co-op) will provide, if they get a license, another company for people to choose to buy health insurance from," Kimbell says. "Long-term, their fate is no more or less certain than any other carriers in the market today."
Another wild card is the U.S. Supreme Court. But Fleischer says the co-op will go ahead even if the court strikes down the federal health care law. He says the co-op’s funding is secure because the federal government has already committed the money.