PPACA establishes certain conditions governing participation in the CO-OP program. Specifically, PPACA defines a CO-OP as a health insurance issuer organized under state law as a nonprofit, member corporation of which the activities substantially consist of the issuance of qualified health plans in the individual and small group markets in the state where CO-OPs are licensed to issue such plans. PPACA prohibits organizations that were health insurance issuers on July 16, 2009, or sponsored by a state or local government from participating in the CO-OP program. PPACA also requires that (1) governance of a CO-OP be subject to a majority vote of its members;of a CO-OP incorporate ethics and conflict of interest standards protecting against insurance industry involvement and interference; and (3) the operation of a CO-OP have a strong consumer focus, including timeliness, responsiveness, and accountability to its members. In addition, PPACA directs CMS to prioritize the award of CO-OP loans to (2) the governing documents applicants that plan to offer qualified health plans statewide, plan to utilize integrated models of care, and have significant private support. Consistent with PPACA, CMS established two types of loans: start-up loans and solvency loans. Start-up loans cover approved start-up costs including salaries and wages, fringe benefits, consultant costs, equipment, supplies, staff travel, and approved indirect costs. After the initial disbursement of start-up loan funds, subsequent disbursements are to be made according to a disbursement schedule established in the loan agreement between CMS and each loan recipient. Subsequent disbursements are also contingent upon evidence demonstrating the loan recipient’s successful achievement of milestones also established as part of the loan agreement between CMS and each loan recipient. Milestones could include obtaining health insurance licensure and submitting timely reporting information in the required format. Loan recipients can coordinate with CMS to adjust the disbursement schedule and milestones as needed. Each disbursement for a start-up loan must be repaid within 5 years of the disbursement date. Solvency loans assist CO-OPs in meeting state insurance solvency CO-OPs may request disbursements for and reserve requirements.solvency loans “as needed” to meet states’ reserve capital and solvency requirements. Reasons for CO-OPs needing additional solvency disbursements could include enrollment growth and higher than anticipated claims from members. CO-OP requests are subject to CMS review of necessity and sufficiency. Each disbursement of a solvency loan must be repaid within 15 years of the disbursement date. The CO-OP program is a direct loan program. For a direct loan, the estimated long-term cost to the government—known as the credit subsidy cost—is calculated as the net present value of estimated cash flows over the life of each loan. Credit subsidy costs are estimated when the present value of estimated payments by the government (such as loan disbursements) exceeds the present value of estimated payments to the government (such as principal repayments, fees, interest payments, and recoveries). Credit subsidy costs are required to be covered by an appropriation. Therefore, if CMS awards a $10 million solvency loan to a CO-OP, the $10 million represents the payments by the government. If CMS calculates the present value for estimated payment to the government to be $6 million, the loan’s subsidy cost would be the net difference of $4 million and would need to be covered by the CO-OP appropriation. To ensure that applicants met the conditions for participating in the CO-OP program, CMS required applications for the CO-OP program loans to include information about organizational structure and governance, as well as provide bylaws, a business plan, and a feasibility study. CMS and a contractor reviewed applications. The contractor was responsible for evaluating applications and recommending loan amounts and a disbursement schedule based on information in the application package and supporting documents. When making the final decisions regarding the loan awards, CMS officials considered the contractors’ recommendations and other factors, including the size of the loan request and anticipated results of funding the application. By December 2012, CMS had awarded CO-OP program loans to 24 organizations. Several laws had the effect of reducing the $6 billion PPACA originally appropriated for the CO-OP program by about 65 percent and limiting program participation. In 2011, two separate appropriations acts rescinded $2.6 billion of the CO-OP appropriation. Additionally, in January 2013, the American Tax Payer Relief Act of 2012 rescinded another $1.3 billion of the unobligated CO-OP program appropriation, leaving about $1.1 billion of the original $6 billion CO-OP appropriation available for the credit subsidy costs of CO-OP program loan awards and The American Tax Payer Relief Act of CO-OP program administration.2012 also transferred any remaining appropriation to a contingency fund for providing assistance and oversight to CO-OP loan awardees, which essentially restricted CO-OP program participation to the 24 organizations that received CO-OP loan awards prior to January 2013. One organization in Vermont was unable to obtain a license as a health insurance issuer from its state’s insurance commissioner. As a result, CMS terminated the organization from the CO-OP program. Hampshire and the CO-OP from Montana expanded to Idaho, and all offered health plans on the exchanges of those states for the first time. (See fig. 1.) PPACA establishes rules governing how issuers can set premium rates. For example, while issuers are no longer able to consider gender or health status in setting premiums, issuers may consider family size, age, and tobacco use. Also, issuers may vary premiums based on areas of residence. States have the authority to use counties, Metropolitan Statistical Areas, zip codes, or any combination of the three in establishing geographic locations by which premiums may vary, known as rating areas.a low of 1 to a high of 67. Most states have 10 or fewer rating areas. The number of rating areas per state varies, ranging from PPACA also requires that coverage sold include certain categories of benefits at standardized levels of coverage specified by metal level— bronze, silver, gold, and platinum. Each metal level corresponds to a proportion of allowable charges that a health plan is expected to pay on average, known as the actuarial value. Health plans within a metal level have the same actuarial value, meaning each plan pays approximately the same proportion of allowable charges as others. Plans from different metal levels have different actuarial values and pay a higher or lower proportion of allowable charges. For example, a gold health plan is more generous overall than a bronze health plan. Actuarial values for health plans under PPACA range from 60 to 90 percent by metal level as follows: bronze (60 percent), silver (70 percent), gold (80 percent), or platinum (90 percent). Issuers may also offer “catastrophic” health plans to individuals under 30 and individuals exempt from the individual mandate. Catastrophic plans have actuarial values that are less than what is required to meet any of the other metal levels. While these plans are required to cover three primary care visits and preventive services at no cost prior to an enrollee reaching the plan’s deductible, they generally do not cover costs for other health care services until a high deductible is met. As of early January 2015, CMS has disbursed about $1.6 billion (64 percent) of the $2.4 billion in loans awarded to the 23 CO-OPs. Specifically, CMS has disbursed $351 million in start-up loans and $1.2 billion in solvency loans. The $351 million in start-up loan disbursements represents about 98 percent of the total amount of start-up loans awarded, whereas the $1.2 billion in solvency loan disbursements represents about 59 percent of the total amount of solvency loans awarded. (See fig. 2.) CMS has disbursed nearly all of the start-up loans awarded to the 23 CO-OPs. As figure 3 shows, disbursements to 11 CO-OPs equaled 100 percent of their start-up loan awards. Disbursements to the remaining 12 CO-OPs were more than 85 percent of awards. (See fig. 3.) In contrast to start-up loans, the percentage of awarded solvency loans disbursed to the 23 CO-OPs has varied depending on their needs. Disbursements to 3 of the 23 CO-OPs—CoOportunity Health, Kentucky Health Cooperative, Inc., and HealthyCT—equal 100 percent of their solvency loan awards. However, disbursements to 9 CO-OPs are less than 50 percent with disbursements to 2 CO-OPs—Land of Lincoln Health and Maine Community Health Options—being less than 30 percent of awards. The percentage of solvency loan funding disbursed to the remaining 11 CO-OPs ranged from 53 percent to 92 percent. (See fig. 4.) The percentages of solvency loan awards disbursed to CO-OPs reflect each CO-OP’s need for additional resources to meet state solvency and reserve requirements, which may be the result of enrollment growth or higher than anticipated claims from members. As of early January 2015, about $22 million of the CO-OP program appropriation was still available for obligation. According to CMS officials, the agency intends to use the remaining funds for administering the CO-OP program over the next few years.