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Statutory Text

SEC. 1322 [42 U.S.C. 18042]. FEDERAL PROGRAM TO ASSIST ESTABLISHMENT
AND OPERATION OF NONPROFIT, MEMBER-RUN
HEALTH INSURANCE ISSUERS.
(a) ESTABLISHMENT OF PROGRAM.—
(1) IN GENERAL.—The Secretary shall establish a program
to carry out the purposes of this section to be known as the
Consumer Operated and Oriented Plan (CO-OP) program.
(2) PURPOSE.—It is the purpose of the CO-OP program to
foster the creation of qualified nonprofit health insurance
issuers to offer qualified health plans in the individual and
small group markets in the States in which the issuers are licensed
to offer such plans.
(b) LOANS AND GRANTS UNDER THE CO-OP PROGRAM.—
(1) IN GENERAL.—The Secretary shall provide through the
CO-OP program for the awarding to persons applying to become
qualified nonprofit health insurance issuers of—
(A) loans to provide assistance to such person in meeting
its start-up costs; and
(B) grants to provide assistance to such person in
meeting any solvency requirements of States in which the
person seeks to be licensed to issue qualified health plans.
(2) REQUIREMENTS FOR AWARDING LOANS AND GRANTS.—
(A) IN GENERAL.—In awarding loans and grants under
the CO-OP program, the Secretary shall—
(i) take into account the recommendations of the
advisory board established under paragraph (3);
(ii) give priority to applicants that will offer qualified
health plans on a Statewide basis, will utilize integrated
care models, and have significant private support;
and
(iii) ensure that there is sufficient funding to establish
at least 1 qualified nonprofit health insurance
issuer in each State, except that nothing in this clause
shall prohibit the Secretary from funding the establishment
of multiple qualified nonprofit health insurance
issuers in any State if the funding is sufficient to
do so.
(B) STATES WITHOUT ISSUERS IN PROGRAM.—If no
health insurance issuer applies to be a qualified nonprofit
health insurance issuer within a State, the Secretary may
use amounts appropriated under this section for the
awarding of grants to encourage the establishment of a
qualified nonprofit health insurance issuer within the
State or the expansion of a qualified nonprofit health insurance
issuer from another State to the State.
(C) AGREEMENT.—
(i) IN GENERAL.—The Secretary shall require any
person receiving a loan or grant under the CO-OP program
to enter into an agreement with the Secretary
which requires such person to meet (and to continue
to meet)—
(I) any requirement under this section for
such person to be treated as a qualified nonprofit
health insurance issuer; and
(II) any requirements contained in the agreement
for such person to receive such loan or
grant.
(ii) RESTRICTIONS ON USE OF FEDERAL FUNDS.—
The agreement shall include a requirement that no
portion of the funds made available by any loan or
grant under this section may be used—
(I) for carrying on propaganda, or otherwise
attempting, to influence legislation; or
(II) for marketing.
Nothing in this clause shall be construed to allow a
person to take any action prohibited by section
501(c)(29) of the Internal Revenue Code of 1986.
(iii) FAILURE TO MEET REQUIREMENTS.—If the Secretary
determines that a person has failed to meet any
requirement described in clause (i) or (ii) and has
failed to correct such failure within a reasonable period
of time of when the person first knows (or reasonably
should have known) of such failure, such person
shall repay to the Secretary an amount equal to the
sum of—
(I) 110 percent of the aggregate amount of
loans and grants received under this section; plus
(II) interest on the aggregate amount of loans
and grants received under this section for the period
the loans or grants were outstanding.
The Secretary shall notify the Secretary of the Treasury
of any determination under this section of a failure
that results in the termination of an issuer’s taxexempt
status under section 501(c)(29) of such Code.
(D) TIME FOR AWARDING LOANS AND GRANTS.—The Secretary
shall not later than July 1, 2013, award the loans
and grants under the CO-OP program and begin the distribution
of amounts awarded under such loans and
grants.
(3) REPAYMENT OF LOANS AND GRANTS.—[As added by section
10104(l)(2)] Not later than July 1, 2013, and prior to
awarding loans and grants under the CO-OP program, the Secretary
shall promulgate regulations with respect to the repayment
of such loans and grants in a manner that is consistent
with State solvency regulations and other similar State laws
that may apply. In promulgating such regulations, the Secretary
shall provide that such loans shall be repaid within 5
years and such grants shall be repaid within 15 years, taking
into consideration any appropriate State reserve requirements,
solvency regulations, and requisite surplus note arrangements
that must be constructed in a State to provide for such repayment
prior to awarding such loans and grants.
(4) ADVISORY BOARD.—[As redesignated by section
10104(l)(1)]
(A) IN GENERAL.—The advisory board under this paragraph
shall consist of 15 members appointed by the Comptroller
General of the United States from among individuals
with qualifications described in section 1805(c)(2) of
the Social Security Act.
(B) RULES RELATING TO APPOINTMENTS.—
(i) STANDARDS.—Any individual appointed under
subparagraph (A) shall meet ethics and conflict of interest
standards protecting against insurance industry
involvement and interference.
(ii) ORIGINAL APPOINTMENTS.—The original appointment
of board members under subparagraph
(A)(ii) shall be made no later than 3 months after the
date of enactment of this Act.
(C) VACANCY.—Any vacancy on the advisory board
shall be filled in the same manner as the original appointment.
(D) PAY AND REIMBURSEMENT.—
(i) NO COMPENSATION FOR MEMBERS OF ADVISORY
BOARD.—Except as provided in clause (ii), a member of
the advisory board may not receive pay, allowances, or
benefits by reason of their service on the board.
(ii) TRAVEL EXPENSES.—Each member shall receive
travel expenses, including per diem in lieu of
subsistence under subchapter I of chapter 57 of title 5,
United States Code.
(E) APPLICATION OF FACA.—The Federal Advisory
Committee Act (5 U.S.C. App.) shall apply to the advisory
board, except that section 14 of such Act shall not apply.
(F) TERMINATION.—The advisory board shall terminate
on the earlier of the date that it completes its duties under
this section or December 31, 2015.
(c) QUALIFIED NONPROFIT HEALTH INSURANCE ISSUER.—For
purposes of this section—
(1) IN GENERAL.—The term ‘‘qualified nonprofit health insurance
issuer’’ means a health insurance issuer that is an organization—
(A) that is organized under State law as a nonprofit,
member corporation;
(B) substantially all of the activities of which consist
of the issuance of qualified health plans in the individual
and small group markets in each State in which it is licensed
to issue such plans; and
(C) that meets the other requirements of this subsection.

(2) CERTAIN ORGANIZATIONS PROHIBITED.—An organization
shall not be treated as a qualified nonprofit health insurance
issuer if—
(A) the organization or a related entity (or any predecessor
of either) was a health insurance issuer on July 16,
2009; or
(B) the organization is sponsored by a State or local
government, any political subdivision thereof, or any instrumentality
of such government or political subdivision.
(3) GOVERNANCE REQUIREMENTS.—An organization shall
not be treated as a qualified nonprofit health insurance issuer
unless—
(A) the governance of the organization is subject to a
majority vote of its members;
(B) its governing documents incorporate ethics and
conflict of interest standards protecting against insurance
industry involvement and interference; and
(C) as provided in regulations promulgated by the Secretary,
the organization is required to operate with a
strong consumer focus, including timeliness, responsiveness,
and accountability to members.
(4) PROFITS INURE TO BENEFIT OF MEMBERS.—An organization
shall not be treated as a qualified nonprofit health insurance
issuer unless any profits made by the organization are required
to be used to lower premiums, to improve benefits, or
for other programs intended to improve the quality of health
care delivered to its members.
(5) COMPLIANCE WITH STATE INSURANCE LAWS.—An organization
shall not be treated as a qualified nonprofit health insurance
issuer unless the organization meets all the requirements
that other issuers of qualified health plans are required
to meet in any State where the issuer offers a qualified health
plan, including solvency and licensure requirements, rules on
payments to providers, and compliance with network adequacy
rules, rate and form filing rules, any applicable State premium
assessments and any other State law described in section
1324(b).
(6) COORDINATION WITH STATE INSURANCE REFORMS.—An
organization shall not be treated as a qualified nonprofit
health insurance issuer unless the organization does not offer
a health plan in a State until that State has in effect (or the
Secretary has implemented for the State) the market reforms
required by part A of title XXVII of the Public Health Service
Act (as amended by subtitles A and C of this Act).
(d) ESTABLISHMENT OF PRIVATE PURCHASING COUNCIL.— (1) IN GENERAL.—Qualified nonprofit health insurance
issuers participating in the CO-OP program under this section
may establish a private purchasing council to enter into collective
purchasing arrangements for items and services that increase
administrative and other cost efficiencies, including
claims administration, administrative services, health information
technology, and actuarial services.
(2) COUNCIL MAY NOT SET PAYMENT RATES.—The private
purchasing council established under paragraph (1) shall not
set payment rates for health care facilities or providers participating
in health insurance coverage provided by qualified nonprofit
health insurance issuers.
(3) CONTINUED APPLICATION OF ANTITRUST LAWS.—
(A) IN GENERAL.—Nothing in this section shall be construed
to limit the application of the antitrust laws to any
private purchasing council (whether or not established
under this subsection) or to any qualified nonprofit health
insurance issuer participating in such a council.
(B) ANTITRUST LAWS.—For purposes of this subparagraph,
the term ‘‘antitrust laws’’ has the meaning given
the term in subsection (a) of the first section of the Clayton
Act (15 U.S.C. 12(a)). Such term also includes section
5 of the Federal Trade Commission Act (15 U.S.C. 45) to
the extent that such section 5 applies to unfair methods of
competition.
(e) LIMITATION ON PARTICIPATION.—No representative of any
Federal, State, or local government (or of any political subdivision
or instrumentality thereof), and no representative of a person described
in subsection (c)(2)(A), may serve on the board of directors
of a qualified nonprofit health insurance issuer or with a private
purchasing council established under subsection (d).
(f) LIMITATIONS ON SECRETARY.—
(1) IN GENERAL.—The Secretary shall not—
(A) participate in any negotiations between 1 or more
qualified nonprofit health insurance issuers (or a private
purchasing council established under subsection (d)) and
any health care facilities or providers, including any drug
manufacturer, pharmacy, or hospital; and
(B) establish or maintain a price structure for reimbursement
of any health benefits covered by such issuers.
(2) COMPETITION.—Nothing in this section shall be construed
as authorizing the Secretary to interfere with the competitive
nature of providing health benefits through qualified
nonprofit health insurance issuers.
(g) APPROPRIATIONS.—There are hereby appropriated, out of
any funds in the Treasury not otherwise appropriated,
$6,000,000,000 to carry out this section.
(h) TAX EXEMPTION FOR QUALIFIED NONPROFIT HEALTH INSUR- ANCE ISSUER.— (1) IN GENERAL.—Section 501(c) of the Internal Revenue
Code of 1986 (relating to list of exempt organizations) is
amended by adding at the end the following:
‘‘(29) CO-OP HEALTH INSURANCE ISSUERS.— ‘‘(A) IN GENERAL.—A qualified nonprofit health insurance
issuer (within the meaning of section 1322 of the Patient
Protection and Affordable Care Act) which has received
a loan or grant under the CO-OP program under
such section, but only with respect to periods for which the
issuer is in compliance with the requirements of such section
and any agreement with respect to the loan or grant.
‘‘(B) CONDITIONS FOR EXEMPTION.—Subparagraph (A)
shall apply to an organization only if—
‘‘(i) the organization has given notice to the Secretary,
in such manner as the Secretary may by regulations
prescribe, that it is applying for recognition of
its status under this paragraph,
‘‘(ii) except as provided in section 1322(c)(4) of the
Patient Protection and Affordable Care Act, no part of
the net earnings of which inures to the benefit of any
private shareholder or individual,
‘‘(iii) no substantial part of the activities of which
is carrying on propaganda, or otherwise attempting, to
influence legislation, and
‘‘(iv) the organization does not participate in, or
intervene in (including the publishing or distributing
of statements), any political campaign on behalf of (or
in opposition to) any candidate for public office.’’.
(2) ADDITIONAL REPORTING REQUIREMENT.—Section 6033 of
such Code (relating to returns by exempt organizations) is
amended by redesignating subsection (m) as subsection (n) and
by inserting after subsection (l) the following:
‘‘(m) ADDITIONAL INFORMATION REQUIRED FROM CO-OP INSURERS.—An
organization described in section 501(c)(29) shall include
on the return required under subsection (a) the following information:

‘‘(1) The amount of the reserves required by each State in
which the organization is licensed to issue qualified health
plans.
‘‘(2) The amount of reserves on hand.’’.
(3) APPLICATION OF TAX ON EXCESS BENEFIT TRANSACTIONS.—Section
4958(e)(1) of such Code (defining applicable
tax-exempt organization) is amended by striking ‘‘paragraph
(3) or (4)’’ and inserting ‘‘paragraph (3), (4), or (29)’’.
(i) GAO STUDY AND REPORT.—
(1) STUDY.—The Comptroller General of the General Accountability
Office shall conduct an ongoing study on completion
and market concentration in the health insurance market
in the United States after the implementation of the reforms
in such market under the provisions of, and the amendments
made by, this Act. Such study shall include an analysis of new
issuers of health insurance in such market.
(2) REPORT.—The Comptroller General shall, not later
than December 31 of each even-numbered year (beginning with
2014), report to the appropriate committees of the Congress
the results of the study conducted under paragraph (1), including
any recommendations for administrative or legislative
changes the Comptroller General determines necessary or appropriate
to increase competition in the health insurance market.