Legislature Passes Regulatory Framework For CO-OPs

The Legislature passed AB 1846, which establishes Consumer Owned and Operated Plans (CO-OPs), as outlined under the Affordable Care Act (ACA). AB 1846 establishes a regulatory framework for CO-OPs so that non-profit organizations can participate in the program and receive federal funding.

CO-OPs are private, non-profit health insurers whose boards of directors are made up of CO-OP customers. Members elect the board of directors. CO-OPs must use their profits to lower premiums; improve health benefits and quality of health care; expand enrollment; or otherwise contribute to the stability of coverage for members. As non-profit health insurers or HMOs, CO-Ops are subject to the same state laws and regulations that apply to all similarly situated issuers.

By January 1, 2014, consumers will be able to buy a CO-OP health plan through an Affordable Insurance Exchange. Consumers may also be able to buy a plan outside of an exchange. A CO-OP could sell coverage to small businesses. Small business owners would be able to go through a new competitive insurance marketplace for small businesses known as a Small Business Health Option Program (SHOP).

On December 8, the Dept. of Health and Human Services (HHS) issued final standards for establishing CO-OP health insurance plans. Eligible organizations seeking to establish a CO-OP can apply for low interest loans to fund start-up costs and meet solvency requirements. The first round of loan applications was due on October 17, 2011 with subsequent quarterly application deadlines through December 31, 2012. To date, 19 non-profits, offering coverage in 18 states, have been awarded over $1 billion dollars.

Legislature Passes LTC Insurance Reform


The California Legislature passed AB 999, which modifies the rate development process for long-term care insurance (LTC) premiums. California Health Underwriters (CAHU) originally opposed AB 999 because of a provision that would have created a five-year ban on increasing that rates on long-term care insurance policies sold before 2002. Another provision would have implemented a 10-year ban on increasing rates for rate-stabilized LTCi policies. CAHU was successful in removing both bans from AB 999 and is now neutral on the bill as amended. The following are some of the bill’s provisions:

• Premium rate schedules for individual and group LTC insurance policies must be approved by the Insurance Commissioner.

• For each policy, LTC insurance carriers must post, on their Websites, a specimen individual policy form or group master policy and a certificate form.

• The annual consumer rate guide must outline coverage for each product listed in the rate guide.

• For any filing made after January 1, 2013, the insurer must reduce the premiums so that the current lifetime expected loss ratio is equal to or greater than the highest filed loss ratio.

• A condition of approval for proposed rate increases is the contingent benefit on lapse, unless it threatens the insurer’s financial condition. If the insurer increases the premium above a defined threshold, the insured can convert the coverage to paid-up coverage with a new maximum lifetime benefit.


Last Updated 05/25/2022

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