When members of Congress who led the effort to overhaul the U.S. health care system saw the public option slipping away, some of them suggested that a viable alternative would be the fostering of nonprofit health insurance CO-OPs (Consumer Oriented and Operated Plans) throughout the country.
I was among the many who belittled the idea. Having spent two decades in the health insurance industry, I knew how difficult it is for even the biggest insurers to establish a presence in markets where one or two other insurance firms dominate. And there are hardly any markets left where that is not the case.
The barriers to entry in any given market are so high that the only way insurers have been able to establish much of a foothold where they don't already have a presence is to acquire one or more existing companies. Aetna became a big player in Philadelphia, for example, only after it bought U.S. Healthcare several years ago.
If you don't have a sizable membership base, it is difficult to negotiate rates with doctors and hospitals that are as favorable as those that bigger insurers can get. If you have to pay providers more than your competitors, you will have to charge your customers higher premiums. It is almost impossible to grow your membership if you have to price your premiums higher than your competitors. It's a chicken-and-egg thing and is why we have seen such rapid consolidation in the insurance industry. And it's why I was skeptical that startup nonprofit CO-OPs would have a snowball's chance.
I'm happy to report that I might have been wrong. In fact, CO-OPs could be one of the sleepers in the health care reform law that truly transforms how care is financed and delivered in this country. And they could even hasten the day when the big investor-owned corporations cede the marketplace to nonprofits and move on to other ways of earning a profit.
That's because of the financial assistance that eligible nonprofit groups are getting from the federal government -- thanks to the Affordable Care Act -- and also because of the approaches the groups being selected for solvency and startup loans are taking to get their operations up and running.
To date, the Department of Health and Human Services has awarded more than $982 million in low-interest loans to twelve nonprofit groups from California to Maine to help them overcome those barriers to entry. The reform law provides a total of $3.4 billion in loans for local groups that meet high eligibility criteria, so several more prospective CO-OPs will be selected in the months ahead. We're not talking about grants here. The startup money must be repaid to the government -- with interest. All of the CO-OPs will have to offer coverage through the Internet-based marketplaces (exchanges) the reform law requires states to establish by January 1, 2014.
If all goes as planned, every state will have at least one CO-OP. And there are reports that at least one plan already has negotiated a good rate with local hospitals by explaining how CO-OPs can help them reduce the amount of uncompensated care they incur every year by treating uninsured patients.
One of the health policy experts who is optimistic about the transformative potential of CO-OPs is Mila Kofman, former insurance commissioner in Maine who is now a research professor and project director at Georgetown University's Health Policy Institute.
"With seed money from the federal government, along with the subsidies moderate-income and middle class individuals and families will receive if they buy coverage through the exchanges, the CO-OPs could be significant game-changers, especially in states where the whole market is dominated by a single company."
Kofman speaks from experience. The individual and small group marketplace in Maine was dominated by for-profit Anthem Blue Cross (a subsidiary of WellPoint) until the state selected nonprofit Harvard Pilgrim Health Care to provide coverage options for small businesses, individuals and self-employed residents through a public-private partnership called DirigoChoice -- a precursor to the state exchanges -- a few years ago. In 2004, Anthem had a 91 percent share of the individual market and a 68 percent share of the small business market. Five years later, Anthem's share had dropped to 49 percent in both the individual and small business markets because of competition from Harvard Pilgrim.
"Nothing else changed," said Kofman. "It was this private-public partnership that enabled Harvard Pilgrim to come in and open the market to more competition. And when you open the market up to competition, other companies can grow, too, which is what happened in Maine."
Kofman said she believes there is great potential depending on how the CO-OPs are organized. She likes what she has seen so far. At least three of the twelve organizations receiving grants so far will grow out of community health centers that have a focus on providing primary care. Some others are affiliated with Medicaid managed care organizations that also have an emphasis on prevention and primary care.
"Their philosophy is very different from what most of us are used to," she said.
It is this different philosophy that could transform the U.S. health care system, especially if the nonprofit CO-OPs -- which, blessedly, will not have to devote a lot of premium revenue to satisfy Wall Street investors -- live up to their potential.
Follow Wendell Potter on Twitter: www.twitter.com/wendellpotter
The 1% can't wait!
More Tax Cuts for millionaires and billionaires, roll-back of necessary regulation, and "spending cuts" are not the answer to solve all of our problems.
The reason I put quotation marks around spending cuts is because whenever Republicans actually take power, there is never spending cuts.
Don't let Republicans fool you. For them, it's all about profits. Americans suffer and die to keep profit margins high for Republican supported killer corporations.
Great, here comes the next failed loan from our Government to try to enter the business arena. Hope it works, it will probably fail.
and lets face it - the real costs in healthcare are not with 'insurance companies" but with the doctors and hospitals. we need more competition and changes in the Big stupid Medicare program
It isn't the big, stupid Medicare, it is the fat, stupid Americans who are responsible for the oversized health care costs in this country.
The lowest price is usually available only if patients don't use their health insurance. In one case, blood tests that cost an insured patient $415 would have been $95 in cash.
http://www.latimes.com/business/la-fi-medical-prices-20120527,0,7462049,full.story
And this is why our insurance premiums are so high.
Now if the hospital/doctor/clinic wants to claim that they charge such a high price due to the cost of billing the insurance company, you can't tell me that it cost $325.00 in labor/faxing/paper to do the billing.
It's simple, healthy, and painless............for everyone, that is, but the major US corporations that thrive on fattening, poisoning, disabling, and killing Americans for profit.
Why not just mandate coverage costs $1 per month?
Too bad for you that real life doesn't match your failed ideology.
There's that word "competition". Republicans, "conservatives" and tbaggers hate competition. You can be sure they will do everything they can to save the zero competition health care system we have today.
They don't support competition, they support corporatism and government enrichment of the top 0.01% at the expense of everyone else.
While the public option was not able to get past a corporate-owned Senate filibuster, blue states can and are moving ahead in reforms further and more progressive than what passed Congress.
Thanks to the AFCA, it is also possible for states to put statewide public options on their state's health insurance exchange or even go for single-payer health care as Vermont is doing.
California will likely have a multiple number of public options.
http://blogs.kqed.org/stateofhealth/2012/01/13/health-insurance-public-option-alive-and-well-in-california/
California counties already have public options open to their employees and at least San Francisco and Alameada Counties are planning to go statewide on the California exchange. (They are accountable to the elected county governments that formed them.) Blue Cross, a for-profit insurer, lobbied hard to prevent having to face competition from public options on the exchange but were defeated.
It is my hope that these county public options join forces and become a new statewide public option.
Even if "Obamacare" is struck down by the Supreme Court, which I doubt, the coming California health insurance exchange law will stay in place.
While it may seem unfair to progressives currently living in red states to see blue states move ahead, the good news is that these blue states will form a model that can inspire first purple states and then other states to move forward that can lead to national reforms.
http://money.cnn.com/2010/06/15/news/economy/massachusetts_healthcare_reform.fortune/index.htm
You have no public option or co-op open to everyone, only a mandate.