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Health Care Co-ops a Poor Option

Healthcare co-ops are now being promoted as a way to keep government out of healthcare. They might be effective at doing that but it is questionable whether they would be effective at providing health care reform. Most people don’t know about healthcare co-ops because they are not really an option for their healthcare. Senator Kent Conrad (D-ND) has proposed a co-op system in which the government would provide $6Billion in seed money to doctors, businesses and hospitals to form the co-ops. Eventually the co-ops would have to become self-supporting with premiums paid by members. Senator Conrad should be commended for his effort to find a bipartisan compromise but health care co-ops will do little to bring about health care reform.

 During the depression, the Farm Security Administration encouraged the development of rural health cooperatives, and at one point, they had about 600,000 members. Unfortunately, few co-ops survived after the FSA removed its support in the late 1940s. One that did is the Group Health Cooperative in Washington State and it is an example of a successful co-op. It has its own hospitals, hires its own Doctors at salary, and tightly manages its costs and membership. It took eighty years for the co-op to get where it is today and it is unlikely that a start up co-op could achieve the same success in a short time. When the seed money runs out, new co-ops would likely disappear and we will have spent $6Billion with little to show for it. Many health care co-ops have gone bankrupt. An example is Sunkist Growers , once a licensed insurance co-op that covered about 23,000 people. It fell into insolvency because claims outpaced income in 2001 and it left employers and medical providers holding the bag for about $11 million in unpaid medical claims.

Some healthcare co-ops negotiate with private insurance companies to provide insurance for their members. Their advantage is that they provide group insurance rates to small businesses, farmers, and individuals who might otherwise have difficulty negotiating favorable insurance rates.  Their disadvantage is that their rates, co-pays, network providers, and pre-existing condition policies are very much like any other private insurer. One such company is the Farmers Health Cooperative in Wisconsin which cooperates with Aetna and functions much like a PPO.  It has been successful because its members are reasonably healthy people. Co-op health care has mostly been successful in such small demographic niches. Jamie Court, president of Consumer Watchdog, says that “if co-ops attract high-risk people, who would otherwise go uncovered, it could bleed the co-op’s funding dry.”

Government is already providing health care. It is a strange spectacle to see Medicare recipients, Veterans, Congressional Representatives, and Senators decry socialized medicine when they, in fact, benefit from public subsidized health care. Would they be willing to put aside their present health coverage and go on a co-op system? I think not!  The Health Care Reform Bill, H.R. 3200, is a reasonable bill and it should not be replaced by a health co-op system unlikely to be successful.

Research Credit: Barbara Moore

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