Feds Loan $638M For Health Co-ops In 8 States

MATT GOURAS

HELENA, Mont. (AP) — Health care cooperatives that are being launched in eight states announced Tuesday they will receive a total of $638 million in loans from the Obama administration under the federal health insurance law.

The administration said the new nonprofit health insurers will be run by their customers and will be designed to offer coverage to individuals and small businesses. Supporters say the co-ops will keep pressure on private insurance companies for both price and coverage.

Critics, led by House Republicans who voted last year to repeal the health care law, immediately questioned the administration's decision. The House Ways and Means Committee called the loans a political reward to a friendly constituency.

Republicans noted that the recipient that received the largest loan — more than $340 million — was going to a group connected to the Freelancers Union, a nonprofit that serves independent contractors that are a growing segment of the workforce. Members are eligible for health insurance through a company owned by Freelancers.

The legislative panel questioned the organization's eligibility in a statement that said "it appears as though the Obama administration will stop at nothing to reward their political friends."

The administration said they determined the organizations getting the money are able to deliver the required services.

"Freelancers Union clearly met the legal standards under the statute and federal regulations," said Brian Cook, a Centers for Medicare and Medicaid Services spokesman. "They are not an insurer, they are a nonprofit union of independent workers, sole proprietors, and entrepreneurs who do not receive insurance through an employer."

Starting in 2014, millions of people who are currently uninsured will buy private coverage in new state markets under President Barack Obama's health care reform law. Tax-credit subsidies will help customers with the cost of the insurance.

The co-ops will compete in these state-run insurance exchanges, although co-op backers said they do not yet know the cost of premiums when the program will be formally unveiled in late 2013. Initially, they expect to compete for a small share of the overall health insurance market.