The founder of the Vermont Health CO-OP is stepping down as board chair as part of an effort to convince skeptical state regulators to reconsider a recent decision denying the CO-OP a license to sell insurance.

Mitchell Fleischer, the CEO of private insurance and investment firm Fleischer Jacobs Group, says he's ceding his position to minimize distractions as the federally funded CO-OP tries to bounce back from a scalding decision issued by the Department of Financial Regulation last month that accused the fledgling CO-OP of mismanagement and financial instability.

In that decision, DFR commissioner Susan Donegan rejected the CO-OP's application to sell insurance on the federally mandated health care exchange set to launch in January. Using federal funds allocated by "Obamacare," the CO-OP would offer a member-owned alternative to the only two companies currently licensed to sell insurance on the exchange: Blue Cross Blue Shield of Vermont and MVP. 

For now, those plans are on hold. Donegan has said the CO-OP has two choices — submit a new application for licensure, or appeal DFR's decision to the Vermont Supreme Court. Neither could realistically happen quickly enough to let the CO-OP join the health care exchange this year. So the CO-OP's leaders are banking on a third approach: convince Donegan to reopen her decision. 

But the CO-OP needs to make significant changes to have any chance of winning over Donegan. The questions CEO Christine Oliver and Fleischer (pictured) found themselves asking themselves, Fleischer says, boiled down to: "What can we fix? ... And can we get all of this done in the next month?"

Fleischer's resignation — which came officially on June 13 — is part of that plan.

So too is the CO-OP's recent addition of five new members to the board of directors. (Those include M. Jerome Diamond, the former attorney general of Vermont; Steve Post, president and CEO of the Vermont State Employees Credit Union; David Kibbe, vice president of Universal Health Services; Leonard Crouse, former deputy commissioner of DFR; and Chuck Butler, a former executive for Blue Cross Blue Shield of Vermont and Blue Cross Blue Shield of Montana.) Board member David Jillson, the retired business manager from Associates in Orthopaedic Surgery, will serve as the board's interim chair. Jillson will not be drawing a salary, but will receive the standard $250 per meeting payment allotted to each board member.

Fleischer was the mastermind behind the CO-OP's formation; he shepherded the fledgling operation through an application with the U.S. Centers for Medicare & Medicaid Services, ultimately bagging more than $33 million in start-up and solvency loans from the feds. 

"There was a huge amount of time and effort and money to get to where it has gotten," he says, "but it was something that I believed in." Stepping aside, he says, is "a real hard thing to do, to just say I’m doing this so the company can move forward." 

In a letter dated June 17, Fleischer wrote that he put much of his personal and professional life "on pause" to work on the CO-OP and remains dedicated to seeing it succeed. "However, it has become clear that my continued involvement may serve as a distraction which I cannot permit as the CO-OP moves forward in its effort to demonstrate that it should receive a license so Vermonters may have the choice offered by the CO-OP," he continued.

DFR took issue with Fleischer's unusually large salary as board chair: $126,000, compared to the $28,900 and $48,750 salaries paid to Fleischer's counterparts on boards for Blue Cross Blue Shield of Vermont and MVP, respectively. DFR also deemed a contract between the CO-OP and Fleischer's company, Fleischer Jacobs Group, both illegal and a conflict of interest.

Fleischer and Oliver objected to those claims last month, saying that Fleischer's hands-on involvement in the day-to-day operations of the CO-OP merited his high pay.

Meanwhile, Oliver says the CO-OP is working hard on "rates, rates, rates" to prove to the DFR that its financial model is sound. She said the company is also looking at its existing contract with Fleischer Jacobs Group. She says "discussions are ongoing" as to the status of that contract. 

From his new seat on the sidelines, Fleischer says he hopes Commissioner Donegan sees enough substantial change from the CO-OP to give the company another look. "It's her choice to reopen the decision," he says. "Nothing says she has to, but nothing says she can't." 

File photo of Mitchell Fleischer and Christine Oliver by Oliver Parini.