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Vermont Health Cooperative Fights State Rejection

Officials at a newly formed Health Care Cooperative say state regulators deliberately used inaccurate information to reject the group’s license application.

Under the Affordable Care Act, federal loan money is available to help create member owned health care organizations. These new companies would be allowed to sell insurance policies on new state Exchanges beginning in January.

The Vermont Health CO-OP, based in Williston, has received $33 million in loans including $6 million to pay for the group’s start up costs.  But last week the plan hit a major obstacle when the Vermont Department of Financial Regulation rejected the application.                        

Commissioner Susan Donegan said the CO-OP’s financial structure was unsound and she blamed the group’s proposed rates as a major factor in her decision.

“We also saw that estimated rates would be about 15 percent higher than their competitors,” said Donegan. “When you’re selling a product that’s exactly the same as somebody else’s product which as you know is going to happen on the Exchange the products are the same the only way you can distinguish yourself is through rates and other things like reputation and consumer services but I think consumers will be looking at rates.”

Christine Oliver is the CEO of the CO-OP. She says the 15 percent rate number was a placeholder on their application and that the state deliberately used the figure to undermine the CO-OP’s application.

“It can only have been knowingly. They took the piece of our rates a proposed rate, that was filed and then calculated their whole financial solvency based on that rate,” said Oliver. “So there was no intention for us to ever enter the market with rates that were 15 percent higher than our competitors.”

Oliver says it’s also important to note that the federal government conducted a thorough review of the CO-OP’s finances before lending the group more than $30 million.

“They continue to monitor us weekly as a matter of fact with respect to milestones and the finances of the company,” said Oliver. “So this is not hey let’s just throw some money out to the state to try a little grant project. These are loans that the government expects to be repaid.”

At this time, there are only two insurance companies ready to sell policies on the Exchange – Blue Cross and MVP.  Oliver thinks it’s important to have a third.

“We know that competition gets you better pricing gets you more innovation,” said Oliver.

Oliver says the CO-OP is asking the state to reopen its review process so that new information can be used to re-evaluate the application.

It’s not known if state regulators will reopen the review process.  Repeated calls to the Department were not returned on Wednesday.

Bob Kinzel has been covering the Vermont Statehouse since 1981 — longer than any continuously serving member of the Legislature. With his wealth of institutional knowledge, he answers your questions on our series, "Ask Bob."
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