coop-foa-09-13-2012 508.pdf

U.S. Department of Health and Human Services Centers for Medicare & Medicaid Services

Center for Consumer Information and Insurance Oversight Consumer Operated and Oriented Plan [CO-OP] Program

Amended Announcement

Invitation to Apply

Loan Funding Opportunity Number: OO-COO-11-001

CFDA: 93.545

Date: December 9, 2011

Applicable Date Milestones Dates Voluntary Letter of Intent to Apply As soon as possible First Round Application Due Date October 17, 2011 Subsequent Quarterly Application Due Dates (up to and including December 31, 2012) Please note: Applications must be submitted by 8:00pm (Eastern Time) on the due date.

January 3, 2012 April 2, 2012 July 2, 2012 October 1, 2012 December 31, 2012

Anticipated Notice of First Round Loan Awards January 12, 2012 Anticipated Notice of Subsequent Loan Awards approximately 75 days after each applicant receives notice that its application is complete

According to the Paperwork Reduction Act of 1995, no persons are required to respond to a collection of information unless it displays a valid OMB control number. The valid OMB control number for this information collection is 0938-1139. The time required to complete a Start-up Loan application and a Solvency Loan application is estimated to average 516 hours per response. These estimates include the time to review instructions, search existing data resources, gather the data needed, and complete and review the information collection. If you have comments concerning the accuracy of the time estimate(s) or suggestions for improving this form, please write to: CMS, 7500 Security Boulevard, Attn: PRA Reports Clearance Officer, Mail Stop C4-26-05, Baltimore, Maryland 21244-1850.

Table of Contents U.S. Department of Health and Human Services

Centers for Medicare & Medicaid Services

Center for Consumer Information and Insurance Oversight

Consumer Operated and Oriented Plan [CO-OP] Program

Amended Announcement

Invitation to Apply

Loan Funding Opportunity Number: OO-COO-11-001

CFDA: 93.545

Date: December 9, 2011

Table of Contents

OVERVIEW INFORMATION

Key Dates:

Transcripts for the open information teleconferences held on August 10, 2011 and September 7, 2011 are available by viewing the links below

Repayment Period

I. FUNDING OPPORTUNITY DESCRIPTION

A. Purpose and Background

The Advisory Board developed four major principles for awarding loans:

B. Authority

C. CO-OP Governance Requirements

D. Program Goals

E. Types of Awards

F. Milestones for joint Start-up and Solvency Loans and only Solvency Loans

G. Tax Exemption

H. Deeming of qualified health plans offered by CO-OPs

II. AWARD INFORMATION

A. Type of Assistance

B. Total Funding

C. Award Type

D. Anticipated Award Date

E. Estimated Number of Awards

F. The Period of Performance, Reporting Period and Monitoring Period

G. Repayment of Loans

H. Termination of Loan Agreement

III. ELIGIBILITY INFORMATION

A. Eligible Applicants

In addition to all other newly formed nonprofit applicant organizations, the following entities are examples of entities that may be eligible to sponsor CO-OPs, provided that they meet the eligibility criteria described above and do not meet the conditions described in subsection B below:

B. Exclusions from Eligibility

C. Continued Eligibility of Loan Recipient

D. Cost-sharing or Matching

IV. APPLICATION AND SUBMISSION INFORMATION

A. Address to Request Application Package

In order to be considered for a waiver application, an applicant and sub-recipients must adhere to the timelines for the System for Award Management database (SAM, formerly managed by CCR) and Grants.gov registration, as well as request timely assistance with technical problems

B. Content and Form of Application Submission

Recommended Application Documents:

C. Submission Dates and Times

D. Intergovernmental Review

E. Eligible Costs

F. Funding Restrictions

V. APPLICATION REVIEW AND SELECTION INFORMATION

A. Criteria

B. Review and Selection Process

C. Reconsiderations

VI. AWARD ADMINISTRATION INFORMATION

A. Award Notices

B. Administrative and National Policy Requirements

C. Terms and Conditions

D. Reporting

1. Reporting Submissions

E. Technical Assistance

VII. AGENCY CONTACTS

Appendix A: Start-up Loan and Solvency Loan Application Check List

Appendix B: Preparing a Budget and Budget narrative in response to SF424A

Example

Introduction

A. Salaries and Wages

B. Fringe Benefits

C. Consultant Costs

D. Equipment

E. Supplies

F. Travel

G. Other

H. Contractual Costs

I. Direct Costs

J. Indirect Costs

OVERVIEW INFORMATION

Agency Name: Department of Health and Human Services Centers for Medicare and Medicaid Services Center for Consumer Information and Insurance Oversight Funding Opportunity Title: Consumer Operated and Oriented Plan [CO-OP] Program Announcement Type: Initial Catalog of Federal Domestic Assistance (CFDA) Number: 93.545

Note: This amended Funding Opportunity Announcement is being released to conform to the changes published in the Final Rule for the CO-OP program published in the Federal Register on December 13, 2011. The terms of the CO-OP Final Rule may differ from the proposed terms in the NPRM. To the extent that the application or other requirements for a loan change as a result of amendments that are reflected in the Final Rule, applicants that submit applications prior to the publication of the Final Rule will be given an opportunity to revise their application for a loan under this Funding Opportunity Announcement, if necessary.

Key Dates:

Letter of Intent: It is requested, but not required, that an applicant submit a Letter of Intent at the earliest possible date indicating the date on which the applicant intends to apply for joint Start-up and Solvency Loans, or a Solvency Loan. The purpose of the Letter of Intent is to enable CMS to estimate the number of applications and adequately prepare for application review. The Letter of Intent must be signed by the Chief Executive Officer (CEO), Chief Financial Officer (CFO), or an officer of the applicant’s Board of Directors. The signed Letter of Intent must be submitted electronically in PDF format to CO-OP Project Officers Korisha Ramdhanie and Johanna Fabian-Marks at CO-OPProgram@cms.hhs.gov.

First Round Loans

• Grants.gov application due date: October 17, 2011

• Anticipated loan award date: January 12, 2012

Subsequent Loans

• After the first round application due date (October 17, 2011) applications will be accepted quarterly up to and including December 31, 2012, according to the following due dates:

• January 3, 2012;

• April 2, 2012;

• July 2, 2012;

• October 1, 2012; and

• December 31, 2012

**Please note: Applications may be submitted up until 8:00pm Eastern Time on the quarterly application due date.

mailto:CO-OPProgram@cms.hhs.gov

Loan awards or a response to the application will be provided approximately 75 days after each applicant receives notice that its application is complete.

CMS will hold periodic open information teleconferences for prospective applicants of this funding opportunity announcement with dates to be determined. All information and detailed announcements for these calls will be posted on the CO-OP website at:

http://cciio.cms.gov/resources/fundingopportunities/index.html#co-op.

Interested parties and applicants are encouraged to check the website frequently for announcements and updated information that may assist in application preparation.

Transcripts for the open information teleconferences held on August 10, 2011 and September 7, 2011 are available by viewing the links below.

• August 10, 2011:

http://cciio.cms.gov/resources/files/august_10_foa_teleconference_transcript%200816_final.pd f

• September 7, 2011 http://cciio.cms.gov/resources/files/september_7_co_op_teleconference_transcript_final.pdf.p df

• March 1, 2012:

http://cciio.cms.gov/resources/files/coop-foa-transcript-20120301.pdf

• May 16, 2012 http://cciio.cms.gov/resources/files/coop-foa-transcript-20120516.pdf

Repayment Period Loan repayment requirements will be specified in the Loan Agreement and shall be consistent with the terms of the Final Rule as well as with all relevant statutory, regulatory, and other requirements. Repayment requirements will be consistent with State solvency regulations and other similar State laws that may apply, as specified in section 1322(b)(3) of the Affordable Care Act.

Repayment periods will be separately calculated for each partial draw of the total loan amount. Each draw against a Start-up Loan must be repaid within five years of the specific drawdown date, and draws against a Solvency Loan must be repaid within fifteen years of the specific drawdown date. See the Final Rule at 45 CFR §156.520(b)(1) and (2).

I. FUNDING OPPORTUNITY DESCRIPTION

A. Purpose and Background http://cciio.cms.gov/resources/fundingopportunities/index.html#co-op http://cciio.cms.gov/resources/files/august_10_foa_teleconference_transcript%200816_final.pdf http://cciio.cms.gov/resources/files/august_10_foa_teleconference_transcript%200816_final.pdf http://cciio.cms.gov/resources/files/september_7_co_op_teleconference_transcript_final.pdf.pdf http://cciio.cms.gov/resources/files/september_7_co_op_teleconference_transcript_final.pdf.pdf http://cciio.cms.gov/resources/files/coop-foa-transcript-20120301.pdf http://cciio.cms.gov/resources/files/coop-foa-transcript-20120516.pdf

The Patient Protection and Affordable Care Act, Pub. L. No. 111-148, enacted on March 23, 2010, and the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, enacted on March 30, 2010, are collectively referred to in this announcement as the “Affordable Care Act.” The Department of Defense and Full-Year Continuing Appropriations Act, 2011, Pub. L. No. 112-10, which amended the Affordable Care Act, was enacted on April 15, 2011. Section 1322 of the Affordable Care Act created the Consumer Operated and Oriented Plan program (CO-OP program) to foster the creation of new consumer-governed, private, nonprofit health insurance issuers, known as “CO-OPs.” In addition to improving consumer choice and plan accountability, the CO-OP program also seeks to promote integrated models of care and enhance competition in the Affordable Insurance Exchanges established under sections 1311 and 1321 of the Affordable Care Act.

The statute provides loans to capitalize eligible prospective CO-OPs with a goal of having at least one CO- OP in each State. The statute permits the funding of multiple CO-OPs in any State, provided that there is sufficient funding to capitalize at least one CO-OP in each State. Congress provided budget authority of $3.8 billion for the program. The statute directs the Secretary to give priority to applicants that will offer CO-OP qualified health plans on a Statewide basis, will use integrated care models, and have significant private support.

The statute also directs the Secretary to take into account the recommendations of the CO-OP Program Advisory Board established pursuant to section 1322(b)(4) of the Affordable Care Act when awarding loans under the CO-OP program. The Advisory Board issued its recommendations in the report released on April 15, 2010 that is found at:

http://cciio.cms.gov/resources/files/coop_faca_finalreport_04152011.pdf.

The Advisory Board developed four major principles for awarding loans:

(1) Consumer operation, control, and focus must be the salient features of the CO-OP and sustained over time;

(2) Solvency and the financial stability of coverage should be maintained and promoted;

(3) CO-OPs should encourage care coordination, quality and efficiency to the extent feasible in local provider and health plan markets; and

(4) Initial loans should be rolled out as expeditiously as possible so that CO-OPs can compete in the Exchanges in the critical first open enrollment period.

http://cciio.cms.gov/resources/files/coop_faca_finalreport_04152011.pdf

To be eligible for a loan, an applicant must be a private nonprofit member organization and must intend to become a CO-OP. Pursuant to section 1322(c)(2) of the Affordable Care Act, an organization is not eligible for a loan if it was licensed by a State as a health insurance issuer as of July 16, 2009 or it was a related entity or predecessor organization of such an issuer. An organization is also not eligible for a CO- OP loan if the organization has as a sponsor a State or local government, or any political subdivision or instrumentality of a State or local government. See Section III of this Funding Opportunity Announcement for details about eligibility requirements.

As finalized in section 156.515(c) of the Final Rule1, an issuer supported by the CO-OP program will offer at least one CO-OP qualified health plan at the silver level of benefits and one at the gold level of benefits in every individual Affordable Insurance Exchange (Exchange) that serves the geographic area in which it is licensed and intends to provide health care coverage. If an applicant chooses to offer at least one plan in the small group market outside the Exchange, it must commit to offering a CO-OP qualified health plan at both the silver and gold benefit levels in each Small Business Health Options Program (SHOP) that serves the geographic regions in which the organization offers coverage in the small group market. Additionally, section 1322(c)(1)(B) of the Affordable Care Act requires that “substantially all” of the issuer’s activities consist of the issuance of qualified health benefit plans in the individual and small group markets in each State in which it is licensed to issue plans. To satisfy this provision, section 156.515(c)(1) of the Final Rule states that at least two-thirds of the contracts written by a CO-OP must be CO-OP qualified health plans offered in the individual and small group markets of the States in which the CO-OP is licensed. Section 1322(c)(4) of the Affordable Care Act directs that a CO-OP’s profits be used to lower premiums, improve benefits, or for other programs intended to improve the quality of health care delivered to its members. Additionally, the Advisory Board recommended that revenue be used to expand enrollment, or otherwise contribute to the stability of coverage offered by the CO-OP. These new consumer-run, private, nonprofit insurers will be a vehicle for providing quality plans that are affordable, coordinated, and responsive.

1 On December 13, 2011, CMS published in the Federal Register the Final Rule, Patient Protection and Affordable Care Act; Establishment of Consumer Operated and Oriented Plan (CO-OP) Program, including the finalized text of subpart F of part 156, 45 CFR § 156.500 - .520. This Funding Opportunity Announcement describes the provisions of subpart F, as effective in the Final Rule.

Several successful health insurance cooperatives currently exist around the country. However, the establishment of additional health insurance member-based organizations has been impeded by the difficulty of obtaining start-up capital and meeting reserve requirements under current market conditions. The CO-OP program is designed to help overcome this barrier to entry in the health insurance market by providing two types of loans: Start-up Loans and Solvency Loans to eligible applicants to assist them with meeting State solvency requirements. However, section 1322(b)(3) requires that such Solvency Loans be repaid in 15 years. Although the statute refers to Solvency Loans as “grants,” they are loans because they must be repaid.

An applicant may apply in this announcement for (1) joint Start-up and Solvency Loans;2 or (2) only a Solvency Loan. The first option provides the recipient with both a Start-up Loan and a Solvency Loan issued through a single application. Start-up Loans are intended to assist applicants with the many start-up costs associated with establishing a new health insurance issuer. Solvency Loans are intended to assist applicants with meeting the solvency requirements of States in which the applicant seeks to be licensed to issue CO-OP qualified health plans.

B. Authority Section 1322 of the Affordable Care Act directs the Secretary to establish the CO-OP program that provides loans to foster the creation of member-governed qualified nonprofit health insurance issuers to offer CO-OP qualified health plans in the individual and small group markets in the States in which they are licensed to offer such plans.

C. CO-OP Governance Requirements Pursuant to section 1322 of the Affordable Care Act, CO-OPs must be consumer-governed. The minimum standards an organization must meet in order to be considered a CO-OP, including that the organization be governed by a board of directors, all of whom must be elected by a majority vote of the CO-OP’s members, are described in 45 CFR part 156 subpart F. Because it is impossible to meet this standard prior to actually enrolling members, the Final Rule allows a formation board of directors to govern the CO-OP until no later than one year after the effective date on which the CO-OP provides coverage to its first member, at which time the CO-OP must hold elections for the “operational” board of directors. The transition to governance by the full operational board can occur in phases through two or more elections. The entire operational board must be elected no later than two years after the effective date on which the CO-OP provides coverage to its first member.

2 This option is referenced throughout the FOA as “joint Start-up and Solvency Loans.” Although an applicant will submit only one application to apply for both a Start-up Loan and a Solvency Loan, and the loans will be awarded at the same time. Please note that they are two separate loans with different terms and conditions.

Please see 45 CFR §156.515 for additional CO-OP governance requirements. An applicant for joint Start-up and Solvency Loans or only a Solvency Loan should refer to section IV.B.7 for application instructions related to CO-OP governance.

D. Program Goals Section 1322 of the Affordable Care Act created the Consumer Operated and Oriented Plan program (CO-OP program) to foster the creation of new consumer-governed, private, nonprofit health insurance issuers, known as “CO-OPs.” In addition to improving consumer choice and plan accountability, the CO- OP program also seeks to promote integrated models of care and enhance competition in the Affordable Insurance Exchanges established under sections 1311 and 1321 of the Affordable Care Act.

E. Types of Awards

1. Joint Start-up and Solvency Loans Start-up Loans are intended to assist applicants with approved start-up costs associated with establishing a new health insurance issuer.

Pursuant to section 1322(b)(2)(C)(ii) of the Affordable Care Act, loan recipients are prohibited from using any funds received under this Funding Opportunity Announcement for carrying on propaganda, or otherwise attempting, to influence legislation; or for marketing.

An applicant is not required to apply for a Start-up Loan. If an applicant has already accomplished the tasks intended to be funded by the Start-up Loan, it may apply directly for a Solvency Loan. Please see subsection 2 below for information on applying for only a Solvency Loan and a description of the intended uses of the Solvency Loan.

If an applicant applies for a Start-up Loan, that application will also be considered an application for a Solvency Loan. Loan recipients will be awarded joint Start-up and Solvency Loans at the same time.

However, funds available under the Solvency Loan will be available for drawdown only when the loan recipient has met the conditions established in the Loan Agreement and all other statutory, regulatory, and other requirements, including any relevant State insurance regulations.

After the first drawdown of Start-up Loan funds, subsequent drawdowns will be conditioned on the submission of evidence of the loan recipient’s successful completion of milestones described in the loan recipient’s Business Plan and Loan Agreement. Please see subsection 2 below for Solvency Loan disbursement restrictions and repayment parameters.

Loan recipients cannot be licensed until they meet State solvency and reserve requirements; therefore, loan recipients may draw down the initial installment of their Solvency Loan before they are licensed.

No later than three years following the first drawdown of the Start-up Loan or one year following the first drawdown of the Solvency Loan, recipients must be licensed in each State in which the loan recipient is offering a CO-OP qualified health plan and must offer at least one CO-OP qualified health plan at the silver and gold benefit levels in every individual market Exchange that serves the geographic regions in which the organization is licensed to operate and if an applicant chooses to offer at least one plan in the small group market outside the Exchange, it must offer at least one CO-OP qualified health plan at the silver and gold benefit level in each SHOP that serves the geographic regions in which the organization offers coverage in the small group market. These standards are set forth in the Final Rule 45 CFR § 156.515. In addition, loan recipients are directed to hold election for the CO-OP’s operational board of directors within one year of the effective date on which the CO-OP provides coverage to its first member. The transition to governance by the full operational board can occur in two phases through two or more elections. The entire operational board must be elected no later than two years after the effective date on which the CO-OP provides coverage to its first member.

Although it is not required, loan recipients are strongly encouraged to be operational by October 2013 so that on January 1, 2014, they will be able to provide coverage to members enrolled through the Exchanges.

In addition to the deadline to become licensed and offer CO-OP qualified health plans as defined in the Final Rule and the deadline to hold elections for the operational board of directors, a loan recipient must implement all the standards to be a CO-OP, finalized at 45 CFR § 156.515, within 5 years following the first drawdown of the Start-up Loan or 3 years following the first drawdown of the Solvency Loan. The lag time between when the loan recipient (1) must be licensed and offering the specified health plans and (2) must meet all the standards to be a CO-OP, effective at 45 CFR part 156 subpart F, is permitted so that the CO-OP has time to meet governance requirements and the proposed provision that at least two-thirds of the contracts issued by the CO-OP be qualified health plans offered in the individual market or individual and small group markets of the States in which the CO-OP is licensed.

2. Solvency Loans

Solvency Loans are intended to assist loan recipients with meeting the reserve requirements of States in which the applicant seeks to be licensed to issue CO-OP qualified health plans. Solvency Loans must be repaid. However, as finalized in section 156.520(a)(2) of the Final Rule, CMS will structure them in a manner that ensures the loan amount is recognized as contributing to the State-determined reserve requirements or other solvency requirements (rather than debt) consistent with the insurance regulations for the States in which the loan recipient will offer CO-OP qualified health plans. In order to assist CO-OPs in meeting State solvency and reserve requirements, the loans will be structured so that premiums would go to pay claims and meet cash reserve requirements before repayment to CMS. The goal of this provision is to satisfy the reserve requirements of the individual insurance department in the States in which each CO-OP seeks licensure.

As previously mentioned, applicants are not required to apply for a Start-up Loan in order to be awarded a Solvency Loan. However, the same application is used to apply for joint Start-up and Solvency Loans and for only a Solvency Loan (see section IV.B for application parameters). An application for only a Solvency Loan must demonstrate that the applicant has already accomplished the tasks intended to be funded under the Start-up Loan (e.g., the applicant should submit proof that it has already developed a provider network). On the other hand, the direction to submit a detailed business plan and budget are not prospective and must be included in the Solvency Loan application. In short, an applicant for a Solvency Loan must demonstrate that it can become licensed and fully operational within one year of receipt of the Solvency Loan.

CMS anticipates that Solvency Loan recipients may need to draw down the loan in multiple phases.

Applicants should request the total amount they anticipate requiring during the life of the loan and not the amount for initial drawdown. After the first drawdown of Solvency Loan funds, subsequent drawdowns will be conditioned on the submission of evidence of the loan recipient’s successful completion of milestones described in the loan recipient’s Business Plan and Loan Agreement.

Milestones for drawdown of the Solvency Loan will be tied to enrollment and plan benefit costs in the CO-OP. As enrollment increases, the CO-OP will be eligible to draw down funds from its Solvency Loan as necessary to meet State and actuarially sound financial requirements. Solvency Loan recipients will submit regular financial and program reports to CMS until 10 years after the date of final loan repayment.

See Section II.G.2, “Interest Rates,” for an explanation of the applicable interest rate that will be charged to each loan recipient. For additional information on terms of repayment, please see Section II. The terms of repayment will be further detailed in the Loan Agreement.

Although it is not required, loan recipients are strongly encouraged to complete the activities funded by the Start-up Loans and begin to draw down on their Solvency Loans on a schedule enabling them to be operational by October 2013 so that on January 1, 2014, they will be able to serve members enrolled through the Exchanges.

In addition to the deadline to become licensed and offer the specified health plans and the deadline to hold elections for the operational board of directors, a loan recipient must implement all of the standards to be a CO-OP, finalized at 45 CFR part 156 subpart F, within 3 years following the first drawdown of the Solvency Loan. The lag time between when the loan recipient must (1) be licensed and offering the specified health plans and (2) meet all standards to be a CO-OP is permitted so that the CO- OP has time to meet governance requirements and the provision that at least two-thirds of the contracts issued by the CO-OP be in the individual and small group market.

F. Milestones for joint Start-up and Solvency Loans and only Solvency Loans The loan recipient will be allowed to draw down funds awarded under (1) the joint Start-up and Solvency Loans or (2) only the Solvency Loan (depending on which type(s) of loans the recipient is awarded) as the recipient reaches milestones proposed in its application and finalized in its Loan Agreement(s). An applicant for the relevant loan(s) must propose milestones and corresponding loan drawdowns in its Business Plan. Examples of possible milestones would be approval of Start-up Loan application; initial hiring of administrative, management, and professional staff; renting workspace, contracting for administrative services; hiring consultants and attorneys to assist with the licensure process, provider negotiation and contracting, vendor contracting, and renting provider networks; satisfying initial State deposits and solvency and reserve amounts; and achieving projected enrollments. The milestones and drawdown plan, which may be modified by CMS in cases where such modification may be warranted to maintain coverage for the CO-OP’s enrollees, prevent market disruption, or serve another public purpose, will be included in the loan recipient’s Loan Agreement. This approach provides the greatest flexibility to accommodate the varying revenue needs of loan recipients while ensuring that loan money is not provided until it is needed as evidenced by the achievement of the pre-determined milestones and supporting documentation.

To facilitate CMS monitoring efforts under this program, loan recipients must notify CMS at least one month in advance, if they have reason to believe that they will be unable to meet any of their milestones. The form and type of this communication will be established as part of the loan agreement.

This advance notification will allow CMS to work with the loan recipient and provide technical assistance, as appropriate, to help the loan recipient meet its milestones and avoid non-compliance with its Loan Agreement.

Applicants for either the joint Start-up and Solvency Loans or only the Solvency Loan must develop and submit a Business Plan that includes milestones according to the guidelines described below. The award for the joint Start-up and Solvency Loans will be issued as two separate loans from a single application.

An applicant applying for joint Start-up and Solvency Loans must provide a Business Plan that includes milestones, corresponding proposed loan drawdown amounts and anticipated fund uses for:

1. The 5 year period beginning with the first drawdown of Start-up Loan funds, leading to the first drawdown of the Solvency Loan and culminating at the point the loan recipient is offering the specified CO-OP qualified health plans in the individual Exchange(s);

2. The point when the loan recipient holds elections for its operational board of directors;

3. The point when the loan recipient meets the CO-OP minimum standards, finalized at 45 CFR part 156 subpart F, including all governance requirements and the provision that at least two-thirds of the contracts issued by the CO-OP are in the individual and small group markets; and

4. The points of additional drawdowns of the Solvency Loan and triggers for the drawdowns (such as enrollment targets, coverage needs, or potential changes in the business or regulatory climate).

Solvency Loans can only be used for limited purposes to support State solvency and reserve requirements. An applicant applying only for a Solvency Loan must provide a Business Plan that includes milestones, corresponding proposed loan drawdowns, and anticipated fund uses for:

1. The one year period beginning with the first drawdown of funds and culminating at the point the

CO-OP is offering the specified CO-OP qualified health plans in the individual Exchange(s);

2. The point when the loan recipient holds elections for its operational board of directors;

3. The point when the loan recipient meets the CO-OP minimum requirements, finalized 45 CFR part

156 subpart F, including all governance requirements and the requirement that at least two-thirds of the contracts issued by the CO-OP are in the individual and small group markets; and

4. The points of additional drawdowns of the Solvency Loan and triggers for the drawdowns (such as enrollment targets, coverage needs, potential changes in the business or regulatory climate or others).

Standards for an applicant’s Business Plan are described in more detail in Section IV.B.2.

G. Tax Exemption Consistent with section 1322(h) of the Affordable Care Act, a CO-OP has the option but is not required to apply for a tax exemption under section 501(c)(29) of the Internal Revenue Code of 1986.

H. Deeming of qualified health plans offered by CO-OPs.

Starting in 2014, individuals and small businesses will be able to purchase private health insurance through State-based competitive marketplaces called Affordable Insurance Exchanges. Exchanges will offer Americans competition, choice, and clout.

As stated in §156.520(e) of the Final Rule, Health plans offered by a loan recipient may be deemed certified by CMS as a qualified health plan to participate in the Exchanges for up to 10 years following the life of any loan awarded to the loan recipient, consistent with section 1301(a)(2) of the Affordable Care Act. As described in the Final Rule, CO-OPs deemed to be certified to participate in the Exchanges will be re-evaluated every two years for compliance with deeming criteria. To be deemed as certified by CMS to participate in the Exchanges, the loan recipient must comply with the standards for CO-OP qualified health plans set forth pursuant to section 1311(c) of the Affordable Care Act, all State-specific standards established by an Exchange for qualified health plans operating in that Exchange, and the standards of the CO-OP program as set forth in the Final Rule. If a loan recipient is deemed to be certified or loses its deemed status and is no longer deemed as certified to participate in the Exchanges, CMS or an entity designated by CMS will provide notice to the Exchanges in which the loan recipient offers CO-OP qualified health plans.

II. AWARD INFORMATION

A. Type of Assistance Loans.

B. Total Funding Budget authority of $3.8 billion, less anticipated administrative or other program costs.

C. Award Type There are two types of loans available. Funds are available to support joint Start-up and Solvency Loans, or only a Solvency Loan. The award amount will be based on the type of loan and the specific needs of each applicant. In determining loan amounts, CMS will look for efficiencies and evaluate whether the proposed budget is sufficient, reasonable, and cost effective to support activities proposed in the application.

D. Anticipated Award Date Loan awards or a response to the application will be provided approximately 75 days after each applicant receives notice that its application is complete.

E. Estimated Number of Awards We estimate that 51 applicants will be awarded joint Start-up and Solvency Loans or only Solvency Loans because section 1322 of the Affordable Care Act envisions a viable CO-OP in every State and the District of Columbia.

These numbers are estimates. The number of awards will vary according to the number of applications and the size of awards. The estimated number of awards reflects the statutory goal of the CO-OP program to establish a CO-OP in each State. It should be noted, however, that the statute allows CMS to fund more than one qualified nonprofit health insurance issuer in any State if the funding is sufficient to do so. However, CMS is unlikely to fund CO-OPs that will directly compete with each other for the same target market if actuarial analysis indicates that these CO-OPs would be less likely to repay loans under those circumstances. If there is no applicant from a State, CMS may award loans to encourage the expansion of a qualified nonprofit health insurance issuer from another State to that State or take other steps to encourage the development of a CO-OP in a State. Additionally, an applicant may apply for loans to establish a CO-OP in more than one State.

For the purposes of this FOA, a “State” means each of the 50 States and the District of Columbia.

All awards (new and continuation) that are issued under this announcement are subject to the availability of funds as well as satisfactory progress. In the absence of funding, CMS is under no obligation to make awards under this announcement.

F. The Period of Performance, Reporting Period and Monitoring Period

1. “Period of Performance”: The period of performance means the period beginning on the date that all parties have signed the Loan Agreement and ending on the date that is ten years after the date on which the recipient makes the final repayment of all loans received. The recipient will have to complete each specified milestone in order to draw down an installment of the loan amount.

2. “Reporting Period”: The reporting period means the time during which the recipient must submit program and financial reports to CMS. The reporting period runs simultaneously with the performance period.

3. “Monitoring Period”: The monitoring period means the time during which the recipient is subject to oversight by CMS, including site visits and requests for information initiated by CMS that supplement required periodic reports. The monitoring period runs simultaneously with the performance period.

G. Repayment of Loans

1. Repayment Terms An applicant must demonstrate the intention and the ability to repay within the statutory repayment window any and all loans received pursuant to this Funding Opportunity Announcement, including applicable interest.

Loan repayment terms will be specified in the Loan Agreement and shall be consistent with the terms of the Final Rule as well as with all relevant statutory, regulatory, and other requirements. Repayment terms will be consistent with State solvency regulations and other similar State laws that may apply, as specified in section 1322(b)(3) of the Affordable Care Act. Repayment periods will be separately calculated for each partial draw of the total loan amount. Each draw against a Start-up Loan must be repaid within five years of the specific drawdown date, and draws against a Solvency Loan must be repaid within fifteen years of the specific drawdown date.

The loan recipient must make loan payments consistent with the repayment schedule approved by CMS and agreed to by the loan recipient until the loan is paid in full consistent with State reserve requirements, solvency regulations, and requisite surplus note arrangements. The repayment schedule may include a grace period, graduated repayments, or a balloon payment (i.e., a large payment for either part or all of the loan amount near the end of the repayment period).

CMS reserves the right to execute a loan modification or a workout with the loan recipient if CMS determines that the loan recipient is unable to repay the loans as a result of State reserve requirements, solvency regulations, or requisite surplus note arrangements or without compromising coverage stability, member control, quality of care, or market stability. CMS will only undertake to negotiate a loan modification or loan workout, in the judgment of CMS, such a modification or workout is in the best interest of consumers, the public, and the CO-OP program, and such action is consistent with all statutory, regulatory, or other requirements.

In the case of a loan modification or workout, the repayment period for loans awarded pursuant to this Funding Opportunity is the repayment period established in the loan modification or workout, subject to the CO-OP’s ability to meet State reserve requirements, solvency regulations, or requisite surplus note arrangements.

The loan recipient must return to CMS any loan amounts that are not used as described in the Loan Agreement.

2. Interest Rates.

Start-up Loan recipients will be charged an interest rate equal to the average interest rate on marketable Treasury securities of similar maturity minus 1 percentage point (provided that interest shall not be less than 0%) on the amount of the drawdown unless: (1) the Start-up Loan recipient fails to repay the Start-up Loan within the repayment period and has not executed a loan modification agreement; (2) the Start-up Loan is terminated by CMS pursuant to sections II.H.3 or II.H.4; or (3) the Start-up Loan recipient fails to comply with additional conditions to be specified in the Loan Agreement. In such cases, penalty interest in subsection II.H.7 may apply. The interest rate will be determined based on the date of the award.

Solvency Loan recipients will be charged an interest rate equal to the average interest rate on marketable Treasury securities of similar maturity minus 2 percentage points (provided that interest shall not be less than 0%) on the amount of the drawdown unless: (1) the Solvency Loan recipient fails to repay the Solvency Loan within the repayment period and has not executed a loan modification agreement; (2) the Solvency Loan is terminated by CMS pursuant to sections II.H.3 or II.H.4; or (3) the Solvency Loan recipient fails to comply with additional conditions to be specified in the Loan Agreement. In such cases, penalty interest in subsection II.H.7 may apply. The interest rate will be determined based on the date of the award.

If the Loan Agreement is terminated by CMS pursuant to II.H.3 and II.H.4, the penalty provisions of subsection II.H.7 apply.

3. Failure to pay.

If a loan recipient fails to make loan payments consistent with the repayment schedule or loan modification or workout approved by CMS, CMS may use any and all remedies available under law to collect the debt.

H. Termination of Loan Agreement.

If an organization’s loan is terminated:

• CMS will make no additional disbursements to the organization;

• CMS will notify the Internal Revenue Service of any Loan Agreement termination or other program non-compliance that may result in the termination of a loan recipient’s tax-exempt status under section 501(c)(29) of the Internal Revenue Code of 1986;

• CMS will inform State regulators of any action by CMS to terminate a loan recipient’s participation in the program.

• CMS will notify the relevant Exchanges that the CO-OP is no longer deemed to be a CO-OP qualified health plan; and

• The CO-OP must pay any applicable penalties and make any applicable repayments consistent with the Loan Agreement, this Funding Opportunity Announcement, and section 1322 (b)(2)(C)(iii) of the Affordable Care Act.

1. Termination of Loan Agreement by CO-OP A loan recipient may terminate its Loan Agreement if:

a. The organization no longer believes that it can create a viable and sustainable CO-OP;

b. The organization provides documentation to CMS in support of such assertion; and

c. CMS approves the request for termination.

A loan recipient that terminates its Loan Agreement must inform CMS and its members of its decision to terminate consistent with the terms specified in the Loan Agreement and State insurance law. If a loan recipient’s Loan Agreement is terminated for any reason, the loan recipient must comply with all applicable Federal and State insurance laws and regulations relevant to its termination from the CO-OP program, including, but not limited to those pertaining to notification to enrollees, licensure, and market participation.

2. CMS-initiated Termination with CO-OP Consent CMS may request that a loan recipient terminate its Loan Agreement if CMS no longer believes that the loan recipient can establish a viable and sustainable CO-OP that serves the interests of its community and the goals of the CO-OP program.

The loan recipient must inform CMS of its response to the termination request within 30 days.

If the loan recipient decides not to terminate its Loan Agreement, it must provide documentation to CMS demonstrating the viability of its business plan and provide a justification for why the loan recipient should be permitted to continue participating in the CO-OP program. CMS reserves the right to terminate the loan without the CO-OP’s consent if the CO-OP’s documentation and justification do not persuade CMS that the loan recipient can establish a viable and sustainable CO-OP that serves the interests of its community and the goals of the CO-OP program. Under these circumstances, the provisions in #6 below will apply.

3. Termination Due to Non-compliance

CMS may terminate the Loan Agreement with a loan recipient if the organization, its providers and suppliers, or contracted entities performing services on its behalf:

a. Fail to meet quality and performance standards, including implementation milestones, enrollment targets, consumer governance and responsiveness, as specified in the Loan Agreement, or any other contractual obligation with CMS;

b. Are not in compliance with one or more provisions finalized in 45 CFR part 156 subpart F.

c. Engage in improper use of Federal funds;

d. Fail to reinvest profits for the benefit of the members;

e. Are unable to effectuate any changes as prescribed by subsequent regulation during the agreement period after given the opportunity to comply with the regulatory change;

f. Engage in material noncompliance, or demonstrate a pattern of noncompliance with reporting requirements;

g. Fail to submit an approvable corrective action plan (CAP), fail to implement an approved CAP, or fail to improve performance after the implementation of a CAP;

h. Violate any applicable laws, rules, or regulations that are relevant to the loan recipient’s operations;

or

i. Knowingly submit to CMS false, inaccurate, or misleading data or information related to the CO-OP program application, governance information, quality data, financial data, and enrollment data.

4. Immediate Termination to Avoid Imminent Harm

CMS may immediately terminate a Loan Agreement with a loan recipient if CMS has cause to believe that the organization engages in, or has engaged in, criminal or fraudulent activities or activities that cause material harm to the CO-OP’s members. If a loan recipient’s Loan Agreement is terminated for this reason the loan recipient must immediately cease its operations under the CO-OP program, consistent with State regulation. CMS will notify state regulators of any termination under this section.

5. Compliance with State insurance regulation

If a loan recipient’s Loan Agreement is terminated for any reason, the loan recipient must comply with all State insurance regulation relevant to its termination from the CO-OP program.

6. Appeal of termination

A loan recipient with a Loan Agreement that is terminated pursuant to subsections 2, 3, or 4 above may appeal CMS’ decision to terminate within 30 days or the loan recipient’s receipt of the notice of termination, consistent with the terms of its Loan Agreement.

7. Penalty payment

Pursuant to section 1322(b)(3) of the Affordable Care Act, if the Loan Agreement is terminated by CMS pursuant to subsections II.H.3 or II.H.4, the loan recipient must repay to the Secretary an amount equal to the sum of: 110 percent of the aggregate amount of loans received pursuant to this Funding Opportunity; plus interest on the aggregate amount of loans received pursuant to this Funding Opportunity for the period when the loans were outstanding at an interest rate equal to the average interest rate on marketable Treasury securities of similar maturity. The interest rate will be determined at the date of award. CO-OPs that voluntarily terminate their loan agreements pursuant to subsections H.1 and H.2 above will not be subject to the penalty.

8. Forfeiture of loan funding

If a loan recipient’s Loan Agreement is terminated, the organization forfeits all unused loan funds received under the CO-OP program. The loan recipient must repay any unused loan funds to CMS:

a. Within 60 days following the resolution of any outstanding debts and run out of outstanding claim obligations, consistent with State insurance regulations if its Loan Agreement is terminated pursuant to subsections H.1, H.2, or H.3, above; or

b. Immediately following the resolution of any outstanding debts consistent with State insurance regulations if its Loan Agreement is terminated pursuant to subsection H.4, above.

The remaining loan funds, interest, and if applicable, penalty, must be repaid in accordance with the terms of the Loan Agreement.

III. ELIGIBILITY INFORMATION

A. Eligible Applicants To be eligible to apply for a loan under the CO-OP program, an applicant must:

1. Intend to become a CO-OP;

2. Have formed a private nonprofit member organization (see Section IV.B for acceptable evidence of certified nonprofit status); and

3. Submit in its loan application an Eligibility Affidavit and Application Certification signed by the applicant’s chief executive officer, chief financial officer, or an officer of the applicant’s Board of Directors, certifying the accuracy, completeness, and truthfulness of all information contained in the loan application; and certifying that, if the applicant organization is awarded loan(s) under this FOA, it will repay them according to the terms laid out in this FOA, finalized in 45 CFR part 156 subpart F, and in the Loan Agreement issued when the award is announced. The signatory must be legally authorized to bind the organization. For a description of the Eligibility Affidavit and Application Certification, see Section IV.B.10.

4. Commit to offering a CO-OP qualified health plan at the silver and gold benefit levels in every individual market Exchange that serves the geographic regions in which it is licensed and intends to provide health care coverage;

5. If choosing to offer at least one plan in the small group market outside the Exchange, commit to offering a CO-OP qualified health plan at both the silver and gold benefit levels in each SHOP that serves the geographic regions in which the organization offers coverage in the small group market;

and

6. Commit that at least two-thirds of the contracts issued by the CO-OP will be CO-OP qualified health plans offered in the individual market or individual and small group markets of the States in which the CO-OP is licensed.

In addition to all other newly formed nonprofit applicant organizations, the following entities are examples of entities that may be eligible to sponsor CO-OPs, provided that they meet the eligibility criteria described above and do not meet the conditions described in subsection B below:

1. A prospective applicant that was not licensed by its State as a health insurance issuer on July 16, 2009, but which has subsequently acquired a State license;

2. Self-funded and Taft-Hartley group health plans;

3. Church plans that were not licensed issuers on July 16, 2009; and

4. Three-share or multi-share programs not licensed by their State insurance regulator.

B. Exclusions from Eligibility

As stated in section 156.510(b) of the Final Rule, an organization is not eligible to apply for a loan if either of the following conditions is met:

1. The organization or a sponsor of the organization is a pre-existing issuer, a holding company (an organization that exists primarily to hold stock in other companies) that controls a pre-existing issuer, a trade association whose members consist of pre-existing issuers and whose purpose is to represent the interests of pre-existing issuers, a…