Administration announces first reform law loans to nonprofit insurance co-ops

The Obama administration on Tuesday announced the first low-interest loans to nonprofit health insurance co-operatives funded under the healthcare reform law.

The loan program was created as an alternative to the politically doomed government-run public option as a way to compete against private plans. Seven plans covering eight states have been awarded $640 million, part of the $6 billion the law sets aside in loans and grants.

"We are excited to support the health insurance CO-OPs," Marilyn Tavenner, the acting administrator of the Center for Medicare and Medicaid Services, said in a statement. "CO-OPs will promote competition in the insurance market and respond well to the health care needs of Americans."

The loans must be repaid over five years. They can only be used to cover start-up costs, not lobbying or marketing; the administration will award more money later to help ensure that the new products have enough cash on hand to cover unexpected claims.

The co-ops have received a fair amount of criticism, with liberals doubting their ability to attract enough patients to have the market clout necessary to bring healthcare costs down. Conservatives, meanwhile, point out that the Health and Human Services Department itself has predicted a 40 percent default rate for the start-up loans.

The first round of awards went to: 

• Midwest Members Health in Iowa and Nebraska ($113 million);

• Montana Health Cooperative ($58 million);

• Freelancers CO-OP of New Jersey ($107 million);

• New Mexico Health Connections ($70 million);

• Freelancers Health Service Corporation of New York ($174 million);

• Freelancers CO-OP of Oregon ($59 million); and

• Common Ground Healthcare Cooperative of Wisconsin ($56 million). 

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