Feds loan $638 million to health cooperatives

The federal government announced today that it is loaning $638 million to seven nonprofit health cooperatives in eight states to help the newfangled insurers get off the ground.

Federal officials said the government will be announcing awards to more health co-ops in other states throughout the year as additional applications are approved, the Associated Press reported.

According to the Oregonian, the first seven loan recipients are New Mexico Health Connections, Montana Health Cooperative, Midwest Members Health in Iowa and Nebraska, Common Ground Healthcare Cooperative in Wisconsin, Freelancers CO-OP of New Jersey, Freelancers CO-OP of Oregon and Freelancers Health Service Corporation in New York.

The Affordable Care Act of 2010 established the customer-run cooperatives to provide health insurance to individuals and small businesses, the AP reported. The health care co-ops are designed to drive cost savings, enhance competition in the forthcoming state-based heath insurance exchanges and provide choice in markets traditionally dominated by one or few insurance companies, according to the National Alliance of State Health Cooperatives (NASHCO).

The Centers for Medicare and Medicaid Services said small business coalitions, physician and hospital associations, agricultural organizations and labor unions are among the groups seeking to start health co-ops, the Oregonian reported.

According to the AP:

Money from the loans will be given to the co-ops over time as they meet benchmarks for setting up claims processes, provider relationships, disease management and other cost-control efforts. Money from the loans will also be used to provide financial footing for the co-ops once they start fielding claims.

"Today's announcement marks an important step toward providing access to high quality, affordable health care and wellness benefits to all Americans," John Morrison, President of NASHCO and former Montana Insurance Commissioner, said in a statement today. "Tens of millions of Americans remain uninsured and businesses are buckling under the crushing cost of health insurance. Co-ops represent an innovative, free enterprise solution to the health coverage crisis.”

More from GlobalPost: Massachusetts high court orders health coverage for legal immigrants

Sign up for our daily newsletter

Sign up for The Top of the World, delivered to your inbox every weekday morning.