Today the Department of Treasury and the Internal Revenue Service (IRS) published final regulations specifying how Consumer Operated and Oriented Plans (CO-OPs) may obtain tax exempt status under Internal Revenue Code Section 501(c)(29) as “Qualified Nonprofit Health Insurance Issuers” (QNHIIs). The IRS had previously issued guidance in Rev. Proc. 2012-11, which the IRS intends to reissue with a 2015 designation.
Created by ACA Section 1322, the CO-OP program is intended to facilitate the creation of member-governed nonprofit health insurance issuers to serve the individual and small group markets. Under the program, the Centers for Medicare & Medicaid Services (CMS) provide loans and repayable grants (collectively a “loan” or “loans”) to organizations that apply to become QNHIIs. The loans are designed to cover start-up costs and seed capital to satisfy state solvency requirements for health insurance issuers. Congress cut most of the funding set aside for the CO-OP program under the fiscal cliff deal (also known as the “American Taxpayer Relief Act of 2012”) in 2013.