Bloomberg News

Union for Independent Contractors to Offer Health Insurance

February 24, 2012

(Updates with comments from union in seventh paragraph.)

Feb. 21 (Bloomberg) -- The Freelancers Union, a nonprofit created to represent freelance workers and independent contractors, will receive $341 million in loans from the U.S. government to start health insurance plans in three states.

The plans will compete with for-profit offerings from companies including UnitedHealth Group Inc. and WellPoint Inc. and nonprofit Blue Cross plans beginning in 2014, Marilyn Tavenner, the acting administrator of the Centers for Medicare and Medicaid Services, said in a statement. The programs are called “co-op” plans, after a provision of the 2010 health law that authorized them.

The co-ops “will promote competition in the insurance market and respond well to the health-care needs of Americans,” Tavenner said in the statement. The plans will begin by 2014 with the opening of new government-run health insurance markets, called exchanges.

Freelancers Union, which is receiving more loan money than any other organization in the program, appears ineligible to participate, congressional Republicans said in a statement. The health law forbids organizations that issued health insurance before July 16, 2009, from running co-op plans, and also requires the co-ops to be nonprofit organizations.

Freelancers Union owns a for-profit health insurance company, Freelancers Insurance Company, that was licensed on Nov. 10, 2008, according to the New York Department of Financial Services.

Eligibility Rules

“Before more than one half-billion dollars in loans goes out the door, there needs to be a clear understanding of who is getting these monies and if they are eligible to receive them,” said Michelle Dimarob, a spokeswoman for the chairman of the House Ways and Means Committee, Representative Dave Camp, a Michigan Republican.

Freelancers Union is a sponsor of the new co-op health plans and as a nonprofit isn’t barred from that role, Jaclyn Kessel, a spokeswoman for the group, said in an e-mail. The union isn’t receiving any of the funding, which is going directly to the co-ops, she said.

The union will establish its co-op plans as new, separate nonprofit organizations, Barbara Smith, the associate director of the co-op program at the Department of Health and Human Services, told reporters earlier in the day.

Three States

Freelancers Union now offers a 401(k) retirement plan and health- and life-insurance coverage for its estimated 171,000 members, according to its website. The organization’s new plans, which will be offered by affiliates created in New York, New Jersey and Oregon, “will be open to everyone,” the group said in a statement, including non-members.

The union expects the new co-ops to cover 200,000 people within five years of after starting.

Freelancers Union is among seven co-op plans that will receive funding from HHS. The others will operate in Iowa, Nebraska, Montana, New Mexico and Wisconsin. The plans will share a total of $639 million in government loans, offered at interest rates of less than 1 percent.

The money will be provided “on an incremental basis” as the organizations reach “milestones” for establishing their insurance plans, to protect against default, Smith said.

Her agency has established “sort of an early warning system to determine if a co-op is going to be in trouble and to see if we can get them on a pathway toward correcting that and becoming viable,” she said.

--Editors: Andrew Pollack, Adriel Bettelheim

To contact the reporter on this story: Alex Wayne in Washington at awayne3@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net


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