Two local organizations, a nonprofit and a for-profit, have joined forces to create an insurance carrier that aims to sell affordable health coverage to individuals and small businesses.

The Missouri Foundation for Health recently announced its award of a $500,000 contract to the Mission Center L3C to develop a tax-exempt health insurance carrier for small employers in Missouri.

The Mission Center is a privately-owned, for-profit “social enterprise incubator” that provides "back-office" accounting, human resources and insurance services for small nonprofit organizations.

Its new startup, Missouri Community Healthcare Co-Op Inc., is a nonprofit to be owned and operated by consumers – not the Mission Center. It is among the first insurance companies in Missouri to declare its plan to participate in a state-based health insurance exchange, to be created under the new national health care overhaul.

Under the Affordable Care Act, state health exchanges are meant to serve as a marketplace for affordable health insurance from private carriers. The exchanges target small businesses and individuals who can't get affordable insurance through their employer, allowing them to pool their buying power to get lower rates, according to the White House.

“We are pioneering a new, tax-exempt health insurance option for nonprofits, small employers and the individuals they serve,” said Chris Miller, chief executive of the St. Louis-based Mission Center.

The goal, Miller said, is “to increase access and quality of care.” The firm’s governing board of directors will include individuals and small employers who are recipients of its health coverage.

The expected launch date is Jan. 1, 2014, when some of the new insurance rules in federal health law are slated to take effect.

But political and business pressures could derail this startup. State health insurance exchanges have become an ultra-sensitive issue for Missouri politicians who have railed against government mandates and subsidies for health insurance. And the Mission Center is counting heavily on gaining a multimillion-dollar, low-interest federal loan to capitalize the new insurance carrier.

“This is something that no one in their right mind would do, but for the fact that the federal government has developed a loan fund specifically designed to develop one of these co-ops in each state,” Miller said.

Illinois and Kansas have similar co-ops being developed. Such ventures face serious obstacles, said Paul Flotken, a group health benefits consultant at St. Louis-based Caravus.

“It’s going to be brutally hard” to do a start-up," he said. “Even the major insurance carriers, who have vast knowledge, vast resources, and vast market share, are uncertain on whether to participate in the exchanges. … These are high-stakes gambles.”

He said that well-established carriers will have the advantage of brand-name recognition entering new health insurance exchanges, whether those markets are controlled by federal or state authorities.

Miller said that the Mission Center is uniquely positioned to create the new insurer because of its experience dealing with health insurers and its access to nonprofit organizations and the uninsured they serve. The Mission Center already administers a Multiple Employer Welfare Arrangement – a statewide healthcare consortium – to coordinate insurance coverage for 60 of its nonprofit clients, their employees and family members, he said.

Missouri officials seem dead-set against establishing a state-based exchange under the federal health reform law. If the state opts out, as federal law allows, federal authorities will likely “partner” with the state to create a Missouri exchange with strict new federal rules.

Ryan Barker, health policy director for the Missouri Foundation for Health, a nonprofit philanthropic organization, said that the Missouri Community Healthcare Co-Op “is a key to providing health care access to the most vulnerable citizens of Missouri.”

Barker said that only 43 percent of Missouri small businesses offer health insurance. “We see a lot of the uninsured whose incomes are too high to qualify for Medicaid, but they either can’t afford their employer’s insurance or their employer doesn’t offer insurance,” he said.

With the foundation’s seed money for start-up costs, the Mission Center has hired two insurance executives to develop a business plan for the new insurance carrier and submit an application for $40 million to $50 million of low-interest loan funds to the federal Centers for Medicare & Medicaid Services.

But the uncertain prospects for health coverage may complicate these plans. Only about a dozen states including Illinois have indicated their intention to establish a state-based health insurance exchange. Many larger insurers have not committed to participating in the exchanges.

“It’s too early to know if and to what extent we would participate,” said Deb Wiethop, a spokeswoman for Anthem Blue Cross & Blue Shield of Missouri.

The Missouri House unanimously passed a bill last year sponsored by Rep. Chris Molendorp, a Republican, which would have enabled Missouri officials to set up an exchange. But the Missouri Senate refused to vote on it.

A November ballot initiative will ask Missouri voters to prohibit the governor from ever setting up a health insurance exchange without voter or legislative approval.

America’s Health Insurance Plans, which represents about 1,300 health insurance plans, has urged the states to create their own exchanges because of their experience in regulating the insurance industry and knowledge of their distinct state populations and markets.

“Right now, there doesn’t seem to be an appetite for it,” said Vincent Blair, a health insurance broker in Webster Groves. “What’s it going to be? It’s kind of like a ghost. It’s a vision that’s not complete. We don’t have a template.”

Blair said that established insurance carriers don’t seem to want to “tip their hand” on how they may approach the market. “Some of my insurance companies don’t know if they’ll participate or not, but I’m sure the majors will be in it,” he said.

He also voiced concern that federal mandates for health coverage, including new underwriting rules and no limitations on preexisting conditions, will result in higher cost premiums for those who do not qualify for Medicaid – and that government subsidies won’t be sufficient to cover the difference. “What’s going to be the subsidy?” he asked.

Miller acknowledges that, even with federal health legislation, prices for insurance “will probably increase in the short term.” But he holds out the hope that the U.S. healthcare system will eventually find ways to contain rising costs.

Read more from Jim Doyle, who covers the business of health care for the Post-Dispatch. On Twitter, follow the Business section @postdispatchbiz.