Last week’s fiscal cliff bargain in Congress dealt a potentially fatal blow to a new health insurance plan that was set to launch this year.

The deal in Congress killed funding for new co-op health insurance plans created by the 2010 Patient Protection and Affordable Care Act. The co-ops, called Consumer Operated and Oriented Plans in the act, were supposed to provide not-for-profit alternatives to existing health insurers across the country.

In Indiana, an organization called Remedy Indiana had asked the federal government for $62 million in loans to launch its health insurance plan. The organization, led by Indianapolis physician Ned Lamkin, has letters of support from all of the state’s major hospital systems—such as Indiana University Health in Indianapolis and Deaconess Health System in Evansville—to participate.

Some employers and benefits brokers also were involved in Remedy Indiana’s plans.

Lamkin said he expected a funding decision from the Obama administration in the first quarter, which would have allowed Remedy Indiana to start offering its plan to employers by the end of 2013. Remedy Indiana already had managers lined up to run the organization.

“It was a shocker for everyone,” said Lamkin, CEO of Remedy Indiana. “It is very discouraging to get so far along and then have the rug pulled out from underneath us.”

Remedy Indiana’s goal is to shift the task of managing patients’ health away from health insurers and back to hospitals and physicians—saving significant money by eliminating waste.

In the short-term, Remedy Indiana planned to save money by getting rid of the need for large profits, fat executive salaries and insurance programs that, in Lamkin’s words, are more focused on making profits than on benefiting patients.

In the long-term, Remedy Indiana planned to convene physicians from all its participating health systems, by specialty, to analyze cost, quality and research data to find better ways of treating patients for less money.

“In collaboration with the health systems, we thought it was too good a chance to make a difference,” Lamkin said.

Lamkin, who also is president of the Indiana Employers Quality Health Alliance, isn’t giving up. He noted that the National Alliance of State Health Co-ops is working on Capitol Hill to get Congress to reconsider the halt of co-op funding—which received no debate before its inclusion in the fiscal cliff deal that passed the Senate 89-8 on Jan. 1.

Lamkin said he's also considering other funding options. For example, he will ask Indiana’s hospital systems to consider funding Remedy Indiana on their own. Many hospitals, such as IU Health, St. Vincent Health, Community Health Network and the Suburban Health Organization, already are considering offering or expanding provider-led health plans.

“They basically could assume responsibility for what they do. Right now, they have health plans battering them over the head,” Lamkin said.