If Congress bails out on a public insurance option, the alternative that appears poised to replace it is something called a health insurance cooperative, a concept that many moderate Democrats � and some Republicans, too- like.
But what is it?
Well what it�s not is a public insurance option. More like a DIY insurer.
See, cooperatives are a company that is partially or wholly owned by its employees, customers or tenants. They are a familiar concept in the Midwest and rural areas. Electric co-ops, farm and dairy co-ops are common examples.
Some people like the sound of a consumer owned insurance business � especially the ones who don�t like the idea of a government-run option (unless you are on Medicare, Medicaid or Tri-Care). Co-ops play well in the Midwest, too, so they have that going for them.
Turns out in the 1930 and 40s there were health insurance co-ops. They were sponsored by the Farm Security Administration because Congress gave employers the current tax credit that encourages them to provide employees coverage.
They worked for a while apparently, until the Farm Security Administration withdrew its support in 1947 and all but two collapsed, because with the FSA they were too small and undercapitalized. The two nonprofit co-ops that survived � Group Health Cooperative in
Washington state and Health Partners in Minnesota � continue operating today.
Well, that�s encouraging. So could it work again now?
Maybe, but it would be challenging, to say the least, according to health care experts.
See, apparently starting your own insurance company isn�t easy. Right, I know aren�t there 1,300 different insurance companies out there now, what�s one more.
Exactly.
First, a co-op would require enough members to get health care providers to take you seriously and negotiate competitive prices. Health care analysts believe a health insurance co-op would need minimum 25,000 members to be financially viable and at least 500,000 (half a million) to negotiate effectively with health care providers.
Those kinds of numbers don�t materialize overnight by forming Acme Insurance Co-op.
Even if you do get that many members, now you have to get a provider network in place, you also need big cash reserves so you can pay claims almost immediately, you need to meet state licensing and solvency requirements.
But all that apparently isn�t even your biggest problem. Your biggest problem is the same problem that many of the 1,300 other private insurers face.
No have no street cred.
In case you didn�t know this already, most insurance markets are highly concentrated, meaning one or two major insurance companies dominate and they negotiate the best reimbursement deals with providers. The statistics I�ve seen are that in 36 states 65 percent of the small group market is controlled by no more than three insurers. In 16 states, one insurer controls half the market.
That�s why in the Philadelphia region Independence Blue Cross runs the show around here, followed by Aetna.
Cigna, Well Point and United Health Group may be among the nation�s biggest private insurers, but not around here. And if you have one of these lesser-Philadelphia market share insurers, you know that many private health care providers don�t accept it, which means:
1. You have to travel to an in-network provider, which could mean traveling must farther than you like.
2. You go to an out-of-network, eat the higher out-of-pocket costs and hope you don�t get balance billed for the rest of the provider�s fee.
Fun.
I read a funny comparison about how saying there are 1,300 insurers and we could have access to all of them is like saying there are 10,000 produce stands in the U.S. � If there is only one within 10 mile of your home, that is the one you have access to.
Funny thing is, currently each state already has the ability to set up a cooperative. None have done so.
So the alternative to a public option is not much of an option.
But wait, some health care analysts say co-ops can be structured to work and effectively compete with the major, established private insurance companies. But I don�t think they�ll like it.
It involves the federal government establishing a health insurance co-op, which would be run regionally and funded adequately to get it started, likely billions. Such a co-op would also carry the brand-name (hello, heard of Medicare) and established health care provider network (likely Medicare�s) that could give it the bargaining power to compete with established private insurers.
Of course, like regular Medicare and Medicaid, doctors could choose not to accept the co-op insurance.
Be interesting to see if they did.
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