MONTPELIER -- When the Vermont Health CO-OP was launched 15 months ago, it was hailed as a consumer-governed alternative to the commercial insurance that would be offered under the new marketplace being set up under the federal health overhaul.

But as Blue Cross Blue Shield of Vermont and MVP Health Care prepare to begin offering coverage through the marketplace, the CO-OP remains in limbo, hoping for two green lights from state and federal agencies that are key to its survival.

It likely won't even hit the Oct. 1 date that companies offering coverage through the marketplace were supposed to be ready to begin signing up subscribers, CO-OP CEO Christine Oliver said Monday.

"We won't hit that. We won't hit it for Oct. 1," she said.

And as for the beginning of next year, when the coverage is to become effective: "January's probably not likely, either," she said of the CO-OP, which stands for consumer operated and oriented plan.

The CO-OP needs the state Department of Financial Regulation to reverse a decision that denied the CO-OP a state license. The agency said its rates were too high to be competitive and criticized a governance structure it said created conflicts of interest.

Since then, the CO-OP has lowered its rates, retooled its governance and submitted a request for reconsideration to the state agency. The state agency could not comment about a pending application, spokeswoman Dale Schaft said Monday.


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Meanwhile, Oliver said she expects to hear by the end of the month what the Centers for Medicare and Medicaid Services planned to do about a nearly $34 million loan agreement announced at the CO-OP's founding last summer.

A CMS spokeswoman said Monday the agency had stopped payments after disbursing $4.8 million of the $6.3 million the CO-OP was to get in startup financing, and had done the same after disbursing $9.8 million of a projected $27.5 million in what's known as solvency financing.

The latter category was to create a fund of the type that insurance companies dip into when extraordinary claims create a cash flow problem by exceeding money coming in through premiums.

Both Oliver and CMS spokeswoman Tasha Bradley said they could not provide details of the talks between the federal agency and the CO-OP.

Bradley said in an email that CMS takes steps to guard against waste, fraud and abuse. "One of the most important is that startup loans are disbursed incrementally and after the CO-OP reaches agreed-upon milestones. Licensure is a significant milestone."

Oliver said a decision by CMS to end the loan agreement and demand repayment of the money disbursed so far would kill the CO-OP's chances for survival.

"Nobody here is starting an insurance company with the money in their pockets," Oliver said.

But she said she still believed the CO-OP can satisfy the state and federal agencies that it can be viable. "We remain hopeful. We're still plugging along here."