When consumers in Oregon go shopping for health care insurance in the new marketplace created by health care reform, one of their choices will be an insurance co-op product that uses profits for customers' benefit. Created by a national membership group of independent workers, the product will be administered by Providence Health Plans of Beaverton, Ore., and provide access to Providence Health & Services providers.
The partnership between Providence Health Plans and Freelancers CO-OP of Oregon is one of the first of seven new, nonprofit health insurance plans to be funded this year by the federal Centers for Medicare and Medicaid Services. With the help of a $59.5 million loan, Providence and Freelancers CO-OP will develop what the Patient Protection and Affordable Care Act calls a Consumer Operated and Oriented Plan, or CO-OP.
CO-OPs evolved from the negotiations over the national health care reform bill as a compromise alternative to a public health insurance option. These private, customer-governed plans are intended to give individuals and small businesses more affordable choices and promote competition, especially in highly concentrated markets. Freelancers CO-OP of Oregon intends to start enrolling customers in October 2013, and to begin offering benefits in January 2014, when the state-based health insurance exchanges, or marketplaces, come on line as mandated by the Affordable Care Act.
"Providence is happy to partner with Freelancers in order to serve Oregon families by offering our service operations expertise and provider networks across the state," said Gary Walker, a Providence spokesman answering questions via email. "This relationship opens up a new market for us created by the Affordable Care Act and expands choices to individuals and their families in offering high-quality, affordable and accessible care."
Each CO-OP needs a sponsor, and in this case the sponsor is Freelancers Union, a nationwide membership organization with about 180,000 members. It has some experience in the health care field. It offers health insurance to its members through a wholly owned subsidiary, Freelancers Insurance Company. The insurance arm was founded in 2009 in New York State and is limited to New York residents.
Freelancers Union became interested in the CO-OP program as a way to "explore avenues for offering health care in other states," said Jenny Curren, senior manager of product development for the organization.
Freelancers Union won three of the first seven CO-OP loans awarded by CMS, totaling $340 million, which must be repaid with interest. (To date, a total of 20 nonprofits offering coverage in 20 states have been awarded nearly $1.6 billion.) The CO-OPs, which are being opened in New York and New Jersey as well as Oregon, will be independent of Freelancers Insurance Company and independent of Freelancers Union. As sponsor, Freelancers Union submitted the funding applications, will facilitate the start-up of the CO-OPs and will provide expertise to help get them off the ground.
The heart of the partnership, Curren said, is that it is a nonprofit, "focused on serving its members rather than driving profits." According to the legislation establishing the CO-OPs, more than half of the board of directors must be customers or members of the CO-OP, and all directors must be elected by a majority vote of the membership. Profits gained by a CO-OP must go directly back to its enrollees, to be used to lower premiums, expand benefits or improve quality.
The CO-OP plan will be available to anyone in Oregon, and the partners estimate that the CO-OP will insure more than 35,000 Oregon workers within the first five years of enrollment. Curren said the members "probably will be the kind of folks we have served in the past — people who do not have insurance available through permanent employers."
Those insured through the Freelancers CO-OP of Oregon will have access to Renton, Wash.-based Providence Health & Services network of some 15,000 providers in Oregon, including eight hospitals, more than 90 clinics and 600 physicians. Freelancers chose Providence as its partner based on the system's level of integration of physicians, clinics and hospitals.
Providence, for its part, is equally happy with its partner.
"It works well for us to collaborate with an organization such as Freelancers that is similarly social-purpose-driven, and are pioneers in offering health care insurance plans to their members," Walker said.
Critics of the CO-OP program question whether the start-up nonprofits will be able to compete head-to-head with commercial insurers for skilled employees and for customers, and whether they'll contribute to the effort to control health care costs.
Curren says Freelancers Union has four years of experience to point to in Freelancers Insurance Company, which has $100 million in annual revenues, provides coverage to nearly 24,000 and has a 98 percent reenrollment rate.
As for Providence, its claim costs are "already among the lowest in the state," Walker said.
CMS promises to closely monitor CO-OPs through quarterly reporting, site visits and external audits. Funds will be distributed only as the sponsors meet performance benchmarks.