[Federal Register Volume 76, Number 22 (Wednesday, February 2, 2011)]
[Proposed Rules]
[Pages 5774-5777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2254]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 170

[OCIIO-9983-NC; Docket No. THE SECRETARY-OS-2010-0034]
RIN 0950-AA19


Planning and Establishment of Consumer Operated and Oriented Plan 
Program; Request for Comments Regarding Provisions of Consumer Operated 
and Oriented Plan Program

AGENCY: Office of Consumer Information and Insurance Oversight, 
Department of Health and Human Services.

ACTION: Request for comments.

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SUMMARY: This document is a request for comments regarding the 
provisions of section 1322 of the Patient Protection and Affordable 
Care Act (the Affordable Care Act), enacted on March 23, 2010, which 
requires the Secretary to establish the Consumer Operated and Oriented 
Plan program. The Secretary of Health and Human Services invites public 
comments in advance of future rulemaking and grant and loan 
solicitations.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on March 4, 2011.

ADDRESSES: All comments will be made available to the public. WARNING: 
Do not include any confidential business information that you do not 
want publicly disclosed. All comments are posted on the Internet 
exactly as received, and can be retrieved by most Internet search 
engines. No deletions, modifications, or redactions will be made to the 
comments received, as they are public records.
    In commenting, please refer to file code OCIIO-9983-NC. Because of 
staff and resource limitations, we cannot accept comments by facsimile 
(FAX) transmission. You may submit comments using any of the following 
methods (please choose only one of the ways listed):
     Electronically. You may submit electronic comments to 
http://www.regulations.gov. Follow the instructions under the ``More 
Search Options'' tab.
     Mail. You may mail written comments to the following 
address ONLY: Office of Consumer Information and Insurance Oversight, 
Department of Health and Human Services, Attention: OCIIO-9983-NC, Room 
445-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW., 
Washington, DC 20201. Please allow sufficient time for mailed comments 
to be received before the close of the comment period.
     Hand or Courier. If you prefer, you may deliver (by hand 
or courier) your written comments before the close of the comment 
period to the following address: Office of Consumer Information and 
Insurance Oversight, Department of Health and Human Services, 
Attention: OCIIO-9983-NC, Room 445-G, Hubert H. Humphrey Building, 200 
Independence Avenue, SW., Washington, DC 20201.
    Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the OCIIO drop slots located in the main lobby of the building. A 
stamp-in clock is available for persons wishing to retain a proof of 
filing by stamping in and retaining an extra copy of the comments being 
filed.
    Comments mailed to the address indicated as appropriate for hand or 
courier delivery may be delayed and received after the close of the 
comment period.

FOR FURTHER INFORMATION CONTACT: Catherine Halverson, Office of 
Consumer Information and Insurance Oversight, Department of Health and 
Human Services, at (301) 492-4391. Customer Service Information: 
Individuals interested in obtaining information about the Patient 
Protection and Affordable Care Act may visit the Secretary of Health 
and Human Services' Web site (http://www.HealthCare.gov).

SUPPLEMENTARY INFORMATION:

[[Page 5775]]

I. Background

    Section 1322 of Patient Protection and Affordable Care Act (the 
Affordable Care Act) requires the Secretary to establish the Consumer 
Operated and Oriented Plan program (CO-OP program) to foster the 
creation of ``qualified nonprofit health insurance issuers'' (qualified 
nonprofit issuers) that will offer qualified health plans in the 
individual and small group markets. Such qualified nonprofit issuers 
must, as directed by the new law, operate with a strong consumer focus 
and use any profits to lower premiums, improve benefits, or improve the 
quality of health care delivered to plan members. For purposes of this 
document, ``a CO-OP'' refers to a qualified health plan offered by a 
qualified nonprofit issuer.
    Under the CO-OP program, the Secretary will make loans to assist in 
funding start-up costs for qualified nonprofit issuers and will award 
grants (repayable in 15 years) to assist such issuers in meeting State 
solvency requirements. The Secretary must award the loans and grants 
and begin funding distribution no later than July 1, 2013. Loans must 
be repaid within 5 years and grants must be repaid within 15 years, 
taking into account State reserve requirements and solvency 
regulations.
    The Affordable Care Act requires the Secretary to convene a Federal 
advisory board. This advisory board will offer recommendations to the 
Secretary on the awarding of loans and grants to emerging co-ops under 
Section 1322.

II. Solicitation of Comments

    We are inviting public comment to aid in the development of 
regulations regarding this loan and grant program. To assist interested 
parties in responding, this request for comment describes various 
topics about which the Secretary is particularly interested in 
receiving public comments. Commenters should use the questions below to 
provide the Secretary with relevant information for the development of 
regulations regarding the CO-OP program. However, it is not necessary 
for commenters to address every question below, and commenters may also 
address additional issues related to the provisions for the CO-OP 
program in the Affordable Care Act. Individuals, groups, and 
organizations interested in providing comments may do so by following 
the instructions in the ADDRESSES section above.
    Below, we summarize relevant statutory provisions and solicit 
public comment on the topics about which the Secretary is particularly 
interested.

A. Section 1322(a) of the Affordable Care Act

    Section 1322(a) of the Affordable Care Act directs the Secretary to 
establish a program to foster, through grants and loans, the 
establishment of qualified nonprofit health insurance issuers. 
Substantially all of the activities of the qualified nonprofit issuers 
must be in the individual and small group markets. The issuers must be 
licensed in the State(s) in which they operate. The CO-OP program shall 
provide for the awarding of loans and grants to provide assistance for 
the establishment of qualified nonprofit issuers.
    Section 1322(c) of the Affordable Care Act defines a ``qualified 
nonprofit health insurance issuer'' as one: (1) That is organized under 
State law as a nonprofit member corporation, (2) substantially all of 
the activities of which consist of the issuance of qualified health 
plans in the individual and small group markets, and (3) that meets 
other requirements of section 1322(c). To qualify for a loan or grant, 
the qualified nonprofit issuer (or a related entity or predecessor) 
must not have been a health insurance issuer on July 16, 2009 and must 
not be sponsored by a State or local government, any political 
subdivision thereof, or any instrumentality of such government or 
political subdivision. Section 1322(c)(4) provides that an organization 
cannot be a qualified nonprofit health insurance issuer unless any 
profits made by the organization are required to be used to lower 
premiums, to improve benefits, and for other programs intended to 
improve the quality of health care delivered to its members. Section 
1322(e) provides that no representative of any Federal, State, or local 
government (or any political subdivision or instrumentality thereof), 
and no representative of a health insurance issuer or a related entity, 
may serve on the board of directors.
    1. What is your assessment of the types of groups or organizations 
that would meet the criteria outlined above, and be successful in 
establishing durable qualified plans in the individual and small group 
markets? Do any organizations currently exist that would satisfy these 
statutory eligibility criteria for receiving a loan or grant under the 
CO-OP program? To what extent, and in what way, do funding needs of 
qualified nonprofit issuers that have already been established differ 
from the needs of those that have not been? How might funding needs 
differ for other groups or organizations that do not currently exist, 
but would be successful in establishing durable qualified plans in the 
individual and small group markets? How would such differences be 
considered in determining appropriate financing terms for Federal loans 
or grants?
    2. What skills, background, and expertise should be required of the 
loan or grant applicant? What skills, background and expertise should 
be required of the management team of the qualified nonprofit issuer 
once the entity is operational (e.g., experience in providing 
coverage)? What factors are most likely to lead to the successful 
operation and sustainability of a CO-OP?
    3. What relationship with CO-OP enrollees would promote initial and 
continued enrollment, e.g., service to a geographic community, a strong 
provider network, its health care mission, etc.?
    4. What issues might a qualified nonprofit issuer face in 
developing provider networks in rural or other medical shortage areas?
    5. How much time would a new qualified non-profit issuer need to 
establish a plan, become operational, begin to accept enrollment and 
provide health insurance coverage? What factors may affect the timeline 
necessary to become operational, and how?
    6. What specific details should be required in feasibility studies, 
business plans, and marketing plans provided by prospective applicants 
before any loan or grant award is made? What should be included in the 
scope and content of these studies and plans? What level of detail 
should be required at the time of application?
    7. What level of investment would be required by a qualified 
nonprofit issuer to develop sufficient administrative and claims 
processing information technology (IT) systems? Is there a minimum 
level of investment that would be required regardless of the size of 
enrollment? Does it vary according to enrollment size, geographic 
location, or other factors, and by how much? Are funding needs for this 
purpose different for any qualified nonprofit issuers that may already 
be in existence, and if so, in what way?
    8. What level of investment would be required by a qualified 
nonprofit issuer to develop sufficient health information technology 
systems necessary to operate a health plan in the health insurance 
Exchange market, including the use of electronic health records? Is 
there a minimum level of investment that would be required regardless 
of the size of enrollment? Does it vary according to enrollment size, 
enrollee characteristics, or other factors, and by how much? Are 
funding needs for this purpose different for any qualified nonprofit 
issuers that

[[Page 5776]]

may already be in existence, and if so, in what way?
    9. What is the range of funding necessary to capitalize and fund 
the establishment of a new qualified nonprofit issuer? How much of that 
amount can be raised privately, or funded through non-Federal 
government support? What factors should be considered in determining 
the appropriate amount of Federal loans and/or grants that would be 
needed to support the establishment of a new nonprofit health insurance 
issuer? To what extent do the funds needed to capitalize a qualified 
nonprofit issuer, and the degree of Federal support necessary likely to 
vary across issuers?
    10. What level of investment is needed to maintain appropriate 
fiduciary management and oversight, including setting actuarially sound 
premiums?
    11. Are you aware of any State laws that could create opportunities 
for or barriers to the formation of qualified nonprofit issuers? Do you 
think States are likely to create or amend licensure laws to 
accommodate the formation of qualified nonprofit issuers? Under what 
circumstances could regional qualified nonprofit issuers serving 
multiple states be formed? Is there a role for a federation of 
qualified nonprofit issuers to serve more than one state or region, 
with risk shared among the issuers? Would this approach be desirable 
for specific types of communities (for example, agricultural/rural 
communities)? How would such a federation be organized? How would it be 
capitalized? What are the advantages and disadvantages of a regional 
qualified nonprofit issuer or a regional federation of issuers? What 
barriers would need to be overcome? What would be the advantages of, 
and barriers to, serving a metropolitan area that crosses State lines?
    12. While ``substantially all'' of a qualified nonprofit issuer's 
activities must be in the individual and small group markets, in what 
other markets or product lines, if any, would it be desirable for 
qualified nonprofit issuers to participate? For instance, could they 
participate in Medicaid or the Children's Health Insurance Program 
(CHIP) and still satisfy the statutory criteria for being a qualified 
nonprofit issuer? How difficult would it be for a new qualified 
nonprofit issuer to successfully participate in the small group market? 
How difficult would it be for a new qualified nonprofit issuer to 
successfully participate in the individual market? To what extent would 
participation in other markets affect the viability of new qualified 
nonprofit issuers or their ability to satisfy the statutory criteria 
for being a qualified nonprofit issuer? What type of start-up costs are 
necessary and reasonable for establishing a qualifying CO-OP? What 
startup costs might be associated with establishing a private 
purchasing council?
    13. Are there other considerations that should inform what costs 
would be eligible for a CO-OP loan? Should there be limited time 
periods for which Federal loans for start-up costs may be available? 
Are there any start-up costs that would be incurred after the qualified 
nonprofit issuer begins to provide coverage under one or more plans?
    14. What market factors would most likely affect a qualified 
nonprofit issuer's durability in the market? What factors should be 
considered in determining which issuers are likely to be viable in the 
long-term?
    15. In evaluating applications for loans and grants, what actuarial 
and minimum plan enrollment criteria should be considered? What is the 
effect, if any, if providers are anticipated to bear risk? How would 
such criteria affect the financial soundness of the qualified issuer?
    16. What types of technical assistance, if any, should the 
Secretary provide to grantees? How should such technical assistance be 
structured?
    17. In what geographic areas are qualified nonprofit issuers most 
likely to be successful (e.g., rural or metropolitan areas or certain 
regions of the country)?
    18. How can qualified nonprofit issuers build provider networks? 
What strategies have proven effective?
    19. What is the extent of interest in forming qualified nonprofit 
issuers under Section 1322 of the Affordable Care Act? In what State(s) 
or geographic region are these entities likely to be established?

B. Section 1322(b) of the Affordable Care Act

    Section 1322(b) of the Affordable Care Act requires that the 
Secretary shall give priority to applicants that will offer qualified 
health plans on a statewide basis, utilize integrated care models, and 
have significant private support.
    1. How should the term ``integrated care model'' be defined in the 
context of section 1322? How should the degree of integration and the 
degree to which integrated care is used be measured? Should qualified 
nonprofit issuers formed by primary care networks, even if they 
contract with secondary and tertiary providers, also be given priority 
for the award of a grant or loan? To what degree should priority be 
based on whether providers share risk?
    2. How should ``significant private support'' be defined in this 
context?
    3. What options for private support should qualified nonprofit 
issuers be able to pursue while maintaining nonprofit status? How can 
such support be structured to avoid inurnment to the benefit of non-
members and protect the independence of consumer governance?
    4. What types of organizations are most likely to be successful in 
meeting any or all of the statutory priority criteria?

C. Section 1322(b)(2)(a)(iii) of the Affordable Care Act

    Section 1322(b)(2)(A)(iii) of the Affordable Care Act requires the 
Secretary to ensure that there is sufficient funding to establish at 
least one qualified nonprofit issuer in each State, except that nothing 
shall prevent the establishment of multiple issuers in a State if the 
funding is sufficient. Section 1322(b)(2)(B) provides that if no issuer 
applies to be a qualified nonprofit health insurance issuer in a State, 
the Secretary may use the amounts for the awarding of grants to 
encourage the establishment of an issuer or the expansion of another 
qualified nonprofit health insurance issuer from another State into the 
State where no issuer applied.
    1. How can the Secretary best ensure sufficient funding to 
establish at least one qualified nonprofit issuer in each State?
    2. How might the Secretary encourage the establishment of a CO-OP 
in a state without a qualified nonprofit issuer?

D. Section 1322(b)(C)(ii) of the Affordable Care Act

    Section 1322(b)(C)(ii) of the Affordable Care Act restricts the use 
of loan and grant funds for (i) carrying out propaganda, or otherwise 
attempting to influence legislation, or (ii) for marketing.
    1. How should the restriction on the use of federal funds for 
marketing be applied?
    2. What other sources of financing for marketing would be available 
to qualified nonprofit issuers?
    3. What accounting standards and metrics should be used to 
determine the sources of funding for marketing activities? If qualified 
nonprofit issuers did engage in these activities using non-federal 
funding, what rules should be in place to ensure federal funds are not 
used?

[[Page 5777]]

E. Section 1322(b)(2)(D) of the Affordable Care Act

    Section 1322(b)(2)(D) of the Affordable Care Act requires the 
Secretary to award and begin the distribution of loans and grants not 
later than July 1, 2013.
    1. To what extent is it necessary for new qualified nonprofit 
issuers to be operational by 2014 in order to be successful? How soon 
should grants or loans be distributed to establish qualified nonprofit 
issuers that can be operational in 2014?
    2. How might funds be best allocated and, to what extent should 
distribution of loan funds be front-loaded to meet the statute's goal 
of establishing a CO-OP in each state?
    3. Given the limited funding for this program, how long should draw 
down on grants and loans be permitted after the award date if loans and 
grants are not being utilized?

F. Section 1322(b)(3) of the Affordable Care Act

    Section 1322(b)(3) of the Affordable Care Act requires that 
regulations regarding the repayment of loans and grants be ``consistent 
with State solvency regulations and other similar State laws that may 
apply.'' Loans shall be repaid within 5 years and grants shall be 
repaid within 15 years, taking into consideration any appropriate State 
reserve requirements, solvency regulations, and requisite surplus note 
arrangements that must be constructed to provide for repayment prior to 
awarding loans/grants.
    1. When developing a repayment schedule, how should HHS take into 
consideration state reserve requirements?
    2. What factors will determine the ability of qualified nonprofit 
issuers to generate sufficient revenues to repay the loans and grants? 
How and when will such issuers likely develop sufficient revenues to 
start the repayment of grants provided to fund reserves?
    3. What interim benchmarks after initial funding should the 
Secretary use to determine an issuer's ongoing likelihood of success 
and whether corrective actions, or other protective measures might be 
necessary with respect to loan and grant funds?
    4. What data are available about the potential success and failure 
rate of nonprofit health plans who may apply for grants and loans? If 
data are not available, what proxy data would be useful to inform 
benchmarks, or other performance standards?

G. Section 1322(c)(2) of the Affordable Care Act

    Section 1322(c)(2) of the Affordable Care Act provides that an 
organization shall not be treated as a qualified nonprofit issuer (and 
therefore shall not be qualified to apply for loans and grants under 
the CO-OP program) if the organization or a related entity (or a 
predecessor of either) was a health insurance issuer on July 16, 2009. 
Section 1322(c)(2) of the Affordable Care Act also provides that an 
organization shall not be treated as a qualified nonprofit issuer if it 
is sponsored by a State or local government, political subdivision 
thereof, or an instrumentality of such government or political 
subdivision.
    1. What should and should not constitute a ``related entity'' or 
``predecessor'' of a health insurance issuer for purposes of Section 
1322 of the Affordable Care Act?

H. Section 1322(c)(3) of the Affordable Care Act

    Section 1322(c)(3) of the Affordable Care Act requires that a 
qualified nonprofit issuer must be a nonprofit, member corporation and 
meet a number of governance requirements including the following:
     The governance of the organization must be subject to a 
majority vote of its members;
     Its governing documents must incorporate ethics and 
conflict of interest standards against insurance industry involvement 
and interference; and
     The organization is required to operate with a strong 
consumer focus, including timeliness, responsiveness, and 
accountability to members.
    1. How can prospective applicants demonstrate a commitment to 
operating with a strong consumer focus, including responsiveness and 
accountability to members? How can prospective applicants demonstrate a 
commitment to responsiveness and accountability to members from diverse 
populations?
    2. What type(s) of governance structure(s) should be required? What 
criteria should be used in determining who is eligible to be members of 
the organization and of the governing body? What type of 
characteristics should the governing body have to ensure consumer 
representation and involvement? What are the options for consumer 
governance, beyond electing the board of directors, that would most 
promote ongoing consumer engagement and responsiveness of the qualified 
nonprofit issuer to consumer needs?

I. Section 1322(c)(4) of the Affordable Care Act

    Section 1322(c)(4) of the Affordable Care Act provides that an 
organization cannot be a qualified nonprofit health insurance issuer 
unless any profits made by the organization are required to be used to 
lower premiums, to improve benefits, and for other programs intended to 
improve the quality of health care delivered to its members.
    1. How could the governance structure and type of organization help 
ensure that excess revenues are used for the benefit of members? What 
accounting standards and metrics should be used to determine how such 
funds are applied? Should such funds in one year be used to lower 
premiums in a subsequent year? What types of benefits might be 
considered? Should excess funds be used to prepay loans or grants, to 
allow for greater revenues/benefits to the members over time? Is this 
preferable to giving refunds to members for the year in which the 
profit was earned?
    2. How should programs intended to improve the quality of care be 
defined and measured in this context?

J. Section 1322(c)(5) of the Affordable Care Act

    Section 1322(c)(5) of the Affordable Care Act requires qualified 
nonprofit issuers to meet all the requirements that other issuers of 
qualified health plans are required to meet, including solvency and 
licensure requirements, rules on payments to providers, network 
adequacy rules, rate and form filing rules, any applicable State 
premium assessments and any other State laws described in section 
1324(b).
    1. Do any States permit newly-formed issuers (or plans) to meet 
these requirements incrementally over a period of time after enrollment 
and provision of health insurance coverage?

K. What other considerations should be addressed relating to the CO-OP 
program?

    Please include in your comment letter any additional questions or 
comments you have about the CO-OP program.

    Dated: January 26, 2011.
Marilyn Tavevnner,
Principal Deputy Administrator and Chief Operating Officer.
[FR Doc. 2011-2254 Filed 1-28-11; 4:15 pm]
BILLING CODE 4150-03-P