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Rent a Plan - March 21, 2011

posted Mar 21, 2011, 6:36 AM by Terry Shilling

Development of a CO-OP need not be overwhelming to an interested provider group.

A CO-OP, like any Health Plan, has essential operating needs consisting of the following functions:

·      Claim processing and payment;

·      Provider network development and contracting;

·      Sales and Marketing;

·      Underwriting and Actuarial projections.

·      Medical Administration

·      Management of Strategy and Operations

Here’s the Good News: A CO-OP sponsored by a provider organization can obtain these functions by buying services a la carte. Outsourced services such as consultants, management services organizations (MSOs) or third-party administrators (TPAs) already do work of this type for insurance companies and the self-funded plans of larger employers.

These organizations have already developed the skill set of benefit plan design, administration, claim processing and marketing. The aforementioned organizations are ready and motivated to lease such services to a fledgling CO-OP. Consulting Actuaries are available as well to advise on plan design issues, and lawyers and consultants would be available for network evaluation or other contract assistance to the CO-OP.

In fact, the Affordable Care Act (ACA) envisioned that, over time, CO-OPs from around the country might come together to purchase these and other services by means of collaborative agreements permitted in the law.

Here’s the Bad News: Outsourced services have disadvantages as well.

1.     They are less expensive in start up mode, but tend to be more expensive should the organization have some success.

2.     Contracting with and coordinating a multitude of outsourced services requires significant skill and effort in itself. Outsourced organizations may or may not fully share the CO-OP vision.

More Bad News: Not only this, Governance, Organizational Culture and Strategy can generally not be outsourced. Advisors exist to support these efforts but the CO-OP Board has the ultimate responsibility. The law itself and the expected regulation will place a significant burden to fulfill the public good envisioned in managing these activities.

Bottom Line: While the development of a Health Plan seems formidable, the fact is that, for providers, much of the cost and infrastructure of operations can be defined in various agreements for services, and the start of payment for services on such an agreement can be deferred in large measure until actual operations. These services can be priced for less than the cost to build comparable in house arrangements. However, extreme caution is warranted in going through the maze of selection of advisors and outsourced components.