Consistent with PPACA, CMS established two types of loans: start-up  loans and solvency loans. CMS and a contractor reviewed applications. Additionally, in  January 2013, the American Tax Payer Relief Act of 2012 rescinded  another $1.3 billion of the unobligated CO-OP program appropriation,  leaving about $1.1 billion of the original $6 billion CO-OP appropriation  available for the credit subsidy costs of CO-OP program loan awards and   The American Tax Payer Relief Act of  CO-OP program administration.2012 also transferred any remaining appropriation to a contingency fund  for providing assistance and oversight to CO-OP loan awardees, which  essentially restricted CO-OP program participation to the 24 organizations  that received CO-OP loan awards prior to January 2013. One organization in Vermont was unable to obtain a license as a health insurance issuer  from its state’s insurance commissioner. PPACA establishes rules governing how issuers can set premium rates. CMS Has Disbursed Nearly Two Thirds of the $2.4 Billion in CO-OP Program Loans Awarded

As of early January 2015, CMS has disbursed about $1.6 billion   (64 percent) of the $2.4 billion in loans awarded to the 23 CO-OPs. The $351 million in start-up loan  disbursements represents about 98 percent of the total amount of start-up  loans awarded, whereas the $1.2 billion in solvency loan disbursements  represents about 59 percent of the total amount of solvency loans  awarded. The percentage of solvency loan funding disbursed  to the remaining 11 CO-OPs ranged from 53 percent to 92 percent. The percentages of solvency loan awards disbursed to CO-OPs  reflect each CO-OP’s need for additional resources to meet state  solvency and reserve requirements, which may be the result of enrollment  growth or higher than anticipated claims from members. Average Premiums for CO-OP Health Plans Were Lower than Those for Other Health Plans in More than Half of the Rating Areas, but Differences Varied across Tiers

In the 22 states where CO-OPs offered health plans on the states’ health  insurance exchanges in 2014, the average premiums for CO-OP health  plans in all tiers were lower than the average premiums for other health  plans in more than half of the rating areas. For 4 of 5 tiers, the average premiums for CO-OP health plans were  lower than the average premiums for other health plans in 54 to   63 percent of rating areas where both a CO-OP and at least one other   For platinum, the average premiums for   issuer offered health plans.CO-OP health plans were lower than the average premium for other  health plans in 89 percent of rating areas where CO-OPs and other  issuers offered health plans. There was also variation across rating areas in the difference between  the average premiums for CO-OP health plans and for other health plans. For example, for all rating areas in which CO-OPs offered silver tier  health plans, average CO-OP premiums were priced between 10 and   30 percent lower in 31 percent of rating areas and between 10 and   30 percent higher in 21 percent of rating areas. However, total enrollment was short of the overall projections of about  559,000 that CO-OPs included in their original loan applications and   8 CO-OPs accounted for about 385,000 (85 percent) of the total number  of CO-OP enrollees. These 8 CO-OPs, in particular, exceeded their  enrollment projections for the first open enrollment period with 5 more  than doubling their projected enrollment. The remaining 14 CO-OPs did  not meet their enrollment projections for the first enrollment period. And  10 of those CO-OPs enrolled less than half of their projected enrollment  numbers. Agency Comments

We provided a draft of this report to HHS for comment. In its written  comments which appear in appendix XXIV, HHS stated its commitment to  beneficiaries of the CO-OP program and taxpayers, and described  various activities used to monitor the CO-OP program. The department  provided technical comments, which we incorporated as appropriate. Appendix I: Consumer Operated and Oriented Plans and Loan Awards

Table 2 provides the total loan amounts awarded to each of the 23  consumer operated and oriented plans (CO-OP) as of January 2014. The premiums for health plans offered by the CO-OP in  Nevada varied depending on the tier and rating area.
Why GAO Did This Study

The Patient Protection and Affordable Care Act (PPACA) established the CO-OP loan program, which helped create 23 consumer-governed, nonprofit health insurance issuers known as CO-OPs. To foster the creation of the CO-OPs, PPACA authorized two types of loans: (1) start-up loans, which help cover the costs of establishing a CO-OP; and (2) solvency loans, which help meet states' solvency requirements associated with becoming a licensed health insurance issuer. While the program seeks to increase competition and improve accountability to members, questions have been raised about the effects CO-OPs will have on health insurance markets.
GAO was asked to study the CO-OP program during 2014. This report examines (1) the status of the CO-OP program loans, (2) how CO-OP health plan premiums compare to the premiums of other health plans, and (3) enrollment in CO-OP health plans. GAO analyzed data from CMS and states; reviewed applicable statutes, regulations, guidance, and other documentation; and interviewed officials from CMS and seven CO-OPs that were selected based on the total amount of loans awarded, geographic region, and the type of health insurance exchange (i.e., federally facilitated or state-based exchange) operated in the state where the CO-OP offered health plans.
In commenting on a draft of this report, the Department of Health and Human Services described activities used to monitor the CO-OP program and provided technical comments, which were incorporated as appropriate.

What GAO Found

As of January 2015, the Centers for Medicare & Medicaid Services (CMS)—the agency that administers and monitors the consumer operated and oriented plan (CO-OP) program—has disbursed about two thirds of the $2.4 billion in loans awarded to 23 CO-OPs. CMS has disbursed about $351 million in start-up loans and $1.2 billion in solvency loans. The percentage of start-up loan funding disbursed to CO-OPs equaled all, or nearly all, of their awards. However, the percentage of solvency loan funding disbursed varied depending on each CO-OP's need to meet state solvency and reserve requirements. Disbursements to three CO-OPs equaled 100 percent of their solvency awards, while disbursements to 20 other CO-OPs ranged from 26 to 92 percent of their awards.
The average premiums for CO-OP health plans were lower than those for other issuers in more than half of the rating areas—geographical areas established by states and used, in part, by issuers to set premium rates—for the 22 states where CO-OPs participated in the exchange during 2014. As shown in the table below, for four of the five coverage tiers—standardized levels of coverage based on the portion of health care costs expected to be paid by the health plan—the average premiums for CO-OP health plans were lower than the average premiums for other health plans in 54 to 63 percent of these rating areas.
In addition, there was variation across rating areas in the difference between the average premiums for CO-OPs and other plans. For example, average CO-OP premiums for silver health plans were priced between 0 and 10 percent lower in 20 percent of rating areas and between 10 and 30 percent lower in 31 percent.
During the first open enrollment period (October 1, 2013, through March 31, 2014), the 22 participating CO-OPs enrolled over 470,000 people. However, the total was short of the overall projections included in the CO-OPs' original loan applications, and 8 of the 22 CO-OPs accounted for more than 85 percent of the total number of CO-OP enrollees. These 8 CO-OPs exceeded their enrollment projections with 5 more than doubling their projected enrollment. The remaining 14 did not meet their enrollment projections. Ten of those CO-OPs enrolled less than half of their projected enrollment numbers. Officials from the CO-OPs GAO interviewed cited relatively high premiums, for example, as a reason for lower than projected enrollment levels.