Health Insurance Co-op’s? Why Not?

Coops Senator Kent Conrad (D-ND) has floated the idea that health insurance co-op’s might be a viable alternative to the “public plan” President Obama is asking for in a health care reform bill.

None of the current health insurance proposals address co-op’s, but there are three good reasons to give it a hard look.

First, a member owned, not-for-profit organization will have it’s member’s interests at heart.  Without the profit motive, fewer claims will be denied and fewer premium dollars will be spent on staff who’s job it is to deny claims.

Second, it has a better chance of passing.  Neither the House’s three-committee bill or the Senate’s Kennedy-Dodd bill meet the President’s threshold for bending the cost curve.  The Wyden-Benett bill does, but does not provide a private plan, instead opting for “exchanges” and state-based pools.  There are too many that for ideological reasons oppose a government run public plan, but are happy with the co-op idea.

Third, for co-op’s to be able to compete, they will have to be large.  At a minimum they would be regional, and a national one is not out of the question.  At that scale, they are basically the same as a public plan.

If this is what it’s going to take to get health insurance reform passed, it’s an option worth looking at.

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20 Comments

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20 responses to “Health Insurance Co-op’s? Why Not?

  1. Former Labor Secretary Robert Reich articulates well most people’s gut-reaction: “Nonprofit health-care cooperatives won’t have any real bargaining leverage to get lower prices because they’ll be too small and too numerous.” Conrad’s answer to that has been consistently to say, “But you know, one of the interesting things when we talk to experts, is that they say critical mass is probably around 500,000 members.” Let’s skip over the difficulties in finding half a million people for a co-op, let’s just say that 500,000 non-profit customers doesn’t change the game. Know how I know? Because, as pointed out by Bob Laszewski, Conrad’s home state of North Dakota has 475,000 people enrolled in the not-for-profit North Dakota Blue Cross Blue Shield. That’s not just competition – it’s a monopoly, 60% of the market. Guess what? It hasn’t helped. Premiums jumped 74% in the past seven years.

    http://healthcare.change.org/blog/view/co-op_idea_isnt_half_a_loaf_–_its_half-baked

  2. dnd

    The Tim Foley piece is entertaining, in the way watching some crazy on a street corner spout his manifesto is entertaining. Lots of false statements and misleading statements.

  3. “false statements and misleading statements.”

    How so?

  4. dnd

    The 74% jump he cites are for ALL North Dakota premiums, not just Blue Cross. 60% of the market, by definition is not a monopoly. Plus that’s the average of premiums, a misleading measure of central tendency. The median is the appropriate measure. But wait! There’s more! The 74% “jump” is about 8% per year. I wish my premiums had only jumped by that much!

    Did I mention that North Dakota Blue Cross isn’t a co-op?

    In the paragraph following the one you cited, he said that co-op’s can’t negotiate drug prices. WTF? It gets more loony from there.

    My point is that his misleading statements and general attitude in his piece indicates that his position is an ideological one, and not one based on technical merits.

  5. You consider an almost 10% increase annually in premiums acceptable? And I think when you call 60% not a monopoly you’re really grasping at straws, for all practical purposes it is a monopoly and if for a co-op to be effective it’s either going to have been regional (a very large region at that) or national, if you’re going to form a national co-op you might as go for the full public plan.

  6. dnd

    1. No, but it’s better than the rate increase on my premiums.
    2. No 60% is not a monopoly. And in the context of Foley’s argument about a company which is not a co-op not being able to contain costs, it is plainly specious. BTW, go to the ND BCBS web page, and you’ll see that almost all the money paid in premiums was paid in claims.
    3. Yes, regional or national. As I said in my post, a co-op stands a better chance of passing than a public plan.

    Just trying to be pragmatic here.

  7. Part of the problem d is we really don’t have a model of a co-op on the scale required to know if it would work or not. On the other hand we do have a working model of a public plan (Medicare) and we know it’s a cheaper way to go. GHI the private insurance company I used to use is non-profit, my premiums reached almost 800 bucks a month before I dropped my coverage and enrolled in a public city run option.

  8. dnd

    We do have model’s of health insurance co-op’s. Read:

    http://www.slate.com/id/2222744/

    Medicare is fabulously successful, but it has huge problems, and I’m not just talking about part D which is a multi-trillion dollar handout to big pharma. Part D demonstrates the problem with the government diddling with health care.

    The biggest advantage to a public option is that we could fold in Medicare and the VA to reduce duplication.

  9. “The biggest advantage to a public option is that we could fold in Medicare and the VA to reduce duplication.”

    On that we agree completely!

  10. “With 550,000 enrollees in Washington, Group Health is the smallest of three major insurers in the state, with a 9 percent market share. It often does raise premiums by less than its competitors, but that does not mean the increases have been insignificant. Annual increases for individual policies have averaged 12.3 percent since 2000, peaking at 24.2 percent in 2003.”

    In the 1980s, it ended the practice of charging all enrollees the same premiums, regardless of their health status, and it has since introduced deductibles, co-payments and out-of-network benefits. Only seven-tenths of 1 percent of enrollees voted in the last board election.

    http://www.nytimes.com/2009/07/07/health/policy/07coop.html

    By raising premiums on the most sick you are punishing the people who are least able to afford the higher premiums.

  11. eProf2

    Interesting post and an interesting discussion on details.

  12. Claire is doing a pretty impressive job at her town meeting.

  13. dnd

    Group Health is not a co-op. They are a not-for-profit. So the reinvesting of revenues rather than disbursement to members could account for the premium increases.

    “By raising premiums on the most sick you are punishing the people who are least able to afford the higher premiums.”

    The piece didn’t say how or how much the differential was, but clearly that’s a risk pool size issue.

  14. dnd

    Claire McCaskill should have held a town hall in East St. Louis. She’d probably get people screaming at her for a “Medicare-for-all” program 😉

  15. “The piece didn’t say how or how much the differential was, but clearly that’s a risk pool size issue.”

    Any difference is unacceptable!

  16. dnd

    One of the interesting arguments of the opposition is that a public plan will bar you from keeping the current coverage you like, as your employer will switch to the public plan. Back when I was a company man, my employers would switch insurers all the time in order to save costs. It was never beneficial to the employees.

  17. dnd

    “Any difference is unacceptable!”

    Again, the article didn’t articulate how they discriminated, so I can’t comment on Group Health.

    But in general, discrimination based on health status or lifestyle is a very slippery slope.

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