HHS awards new grants for health care co-ops

The Health and Human Services Department announced more than $160 million in loans Friday to help establish new insurance plans under President Obama's healthcare law.

The new loans went to two organizations — one in Massachusetts and one in Tennessee — to establish new, non-profit insurance carriers.

The new products, known as co-ops, must reinvest their profits toward providing better care or lowering premiums, and would have to follow the same rules as traditional insurers. 

The Affordable Care Act initially provided $6 billion for co-ops, but Congress has cut the funding down to about $3.4 billion.

HHS has now awarded more than $1.5 billion in co-op loans, covering 20 states, according to a department release.

Supporters say co-ops will give consumers more control over their healthcare, noting that co-ops' leaders will be elected by participants. And because they're non-profit entities, they're seen as potential tools to help control costs and improve quality.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) championed co-ops during the healthcare debate. He framed them as an alternative to the controversial public option, although the two policies have very little in common.

Congressional Democrats have agreed to slash the loan program for co-ops twice, while staunchly defending other Affordable Care Act funds, such as the prevention and public health fund. And Republicans have been critical of co-ops because HHS's own estimates assume that some loans will never be repaid.

Breaking into an insurance market is tough, and because co-ops will have to maintain large cash reserves just like for-profit insurers, some will likely fail. Rep. Marsha Blackburn (R-Tenn.) has compared co-ops to Solyndra, the energy firm that went bankrupt despite receiving loans from the federal government.

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