CO-OPs: Misplaced Faith?

Health insurance cooperatives, examined in a toolkit by the Alliance for Health Reform, form the backbone of the recently approved Senate Finance Committee’s health reform proposal, America’s Healthy Future Act of 2009. The legislative language of the bill was released yesterday, October 19. In an earlier post we discussed this committee’s Consumer Operated and Oriented Plan, or CO-OP.

North Dakota Sen. Kent Conrad.is a major proponent of co-ops.. He and other co-op supporters think that the health insurance co-ops will be able to negotiate as a group to obtain lower rates from medical providers. Since these co-ops would be “consumer-owned and operated,” they, rather than private insurers, will benefit from any profits and savings they obtain..

Unfortunately, experience in the United Sates with health insurance co-ops is very limited. Two co-ops are often cited for their success: Group Health Cooperative of Puget Sound, in Washington state, and HealthPartners, in the Twin Cities of Minneapolis and St. Paul in Minnesota. These co-ops have been in existence for more than 50 years and they are recognized for high quality care, but not necessarily for lower costs and premiums. It takes many years to establish such an operation. And still they cover a tiny segment of the insured population.

One expert who has researched co-ops, Timothy S. Jost, a law professor at the Washington and Lee University law school, told National Public Radio’s Morning Edition on October 2: “Where I've seen cooperatives in operation, they don't really compete on price. They compete on quality, on customer satisfaction. That's good. We need more quality. We need insurance products people are really happy with. But what we need most is cost control."

Furthermore, new co-ops would require a huge infusion of federal and state dollars for startup costs, and experts say that it is hard for new “insurers” to compete in a market with established, “dominant” insurers..

Based on the limited experience we have with co-ops, wouldn’t it be more cost-effective to focus our funds and our energies on a national, proven insurance program similar to Medicare?