As details on state healthcare exchanges continue to become public, there will likely be some surprises, but one thing is certain nothing will match the drama that has unfolded in Vermont. In May, Vermont became the only state (out of 24) to reject a healthcare consumer-oriented and -operated plan, which had hoped to offer products in the state's health insurance exchange. CO-OPs are regional health insurance plans established by nonprofit groups to provide more competition in the commercial sector, including state health insurance exchanges. Originally, the Affordable Care Act included $3.8 billion to fund loans to CO-OPs, and $1.9 billion of that amount was loaned to 24 nonprofits nationally to help get CO-OPs up and running. During the fiscal cliff budget negotiations in January 2013, most of the remaining $1.9 billion was cut, meaning there is no further funding to develop additional CO-OPs.

The Vermont Health CO-OP received a $33.8 million federal startup loan and was putting pieces into place to compete in the exchange with market leader Blue Cross and Blue Shield of Vermont and MVP Health Care. The Vermont Health CO-OP tapped Christine Oliver to serve as CEO, bringing healthcare experience on board. Oliver served as the deputy secretary of the state Agency of Human Services and previously held the positions of commissioner of the Department of Mental Health and deputy commissioner for Health Care Administration in the Department of Banking, Insurance, Securities and Health Care Administration.

However, her experience sure didn't help the CO-OP with state regulators. In denying the CO-OP's license, state regulators pointed to a laundry list of concerns, including unaffordable rates, unrealistically high enrollment projections, and the risk of insolvency. And that is some of the nicer things. Susan L. Donegan, commissioner of the Vermont Department of Financial Regulation, also said the CO-OP's management structure did not meet the standards of corporate governance for proper oversight and good business judgment necessary to conduct the business of insurance. Ouch.

CO-OP officials said they were blindsided by the ruling, and came out swinging. Oliver suggested in an interview that the state's largest and most influential insurer, BCBS of Vermont, may have used its influence to keep the CO-OP out, not wanting the extra competition. Donegan and BCBS officials strongly rejected this theory, and Oliver later tried to move on from those remarks. Oliver has continued to make her way across the Vermont media landscape, blasting back at Donegan's decision, often point-by-point. Oliver and CO-OP co-founder Mitchell Fleischer even tried to bring Democratic Gov. Peter Shumlin into the fray, though after meeting with the duo, Shumlin announced he was, basically, staying out of it.

Some Obamacare detractors have latched onto the situation as proof that CO-OPs are destined for failure. In this case, however, it's more market dynamics. Vermont hasn't licensed a new insurer in the state in around 50 years, and it is not like more insurers have been clamoring to get in. It's a small state, with a low uninsured rate, little room for organic growth and strict insurance regulatory guidelines. And it's not like Vermont is a bastion of conservatism battling against Obamacare. Most on the ground didn't think the ACA went far enough.

Some inside the state have theorized Vermont will be better off without the addition of a CO-OP into the healthcare mix, considering the state is attempting to wind its way toward a single-payer healthcare system in 2017.

These theories only add to the drama in Vermont. After all, the war of words has positioned it as an antagonistic relationship between the CO-OP and Donegan who would have to overturn her ruling for the CO-OP to do business, something CO-OP officials are pushing for. Is this even a possibility. It appears to be a longshot at best. Donegan has said the CO-OP must go through the state Supreme Court for her to consider re-opening the matter. That doesn't sound like someone willing to cut the CO-OP any slack.

Follow Ric Gross on Twitter @RicGrossHLI


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