Health co-op compromise might be part of final system reform bill

Washington -- Health insurance cooperatives are being pitched by some on Capitol Hill as a promising way to expand health coverage to the uninsured without giving the federal government too heavy a hand in the process. But some critics say the concept is too lightweight to do much good.

The health system reform bill approved by the Senate Finance Committee on Oct. 13 does not include a public insurance plan option favored by Democratic leaders and President Obama. Rather, it would implement member-owned health insurance co-ops that would operate at the state level to offer coverage for the uninsured.

At this article's deadline, Democratic leaders were still working on a final Senate bill for floor consideration based on the Finance legislation and a more liberal measure passed by the Senate Health, Education, Labor and Pensions Committee. Although the public option might be incorporated into the final bill, co-ops also might play a role, perhaps as a fallback for states that decide against participating in a federal plan.

But the co-op concept has its congressional detractors. Foremost among them is Sen. Jay Rockefeller (D, W.Va.).

"This is a dying business model for health insurance," Rockefeller wrote in a Sept. 16 letter to Senate Finance Committee Chair Max Baucus (D, Mont.) and Sen. Charles Grassley (R, Iowa), the panel's ranking GOP member. "Moving forward with health insurance cooperatives would expose Americans, who are hoping for a better health care system, to a health care model that has already been tried and largely failed in the vast majority of the country."

Rockefeller ended up voting for the Finance reform bill, but he vowed to continue pushing for the inclusion of a public option in the final Senate legislation.

Over the summer, Rockefeller asked for more information on co-ops from the National Cooperative Business Assn., the U.S. Dept. of Agriculture and the Government Accountability Office. According to the NCBA, there are only five consumer health insurance co-ops, operating in four states. Baucus has proposed investing $6 billion in new co-ops to offer nonprofit, member-run health plans.

But Rockefeller said it would be unwise to invest that much money in a largely unproven concept.

Co-op executives speak out

Executives with the existing health insurance co-ops say they are running a viable model for providing premium health care to their customers. But some also question the rationale of duplicating the model on a national scale.

"The reason to look at the model is because it's a group that gathers together to provide comprehensive care built on a primary care model which has to operate on a budget because it's integrated with an insurance plan," said Eric Larson, MD, MPH, executive director of the Group Health Insurance Institute, the research arm of the Group Health Cooperative in Seattle. "Cooperatives can deliver high-quality care and presumably could do a better job of controlling costs than some of the inflationary models that exist otherwise. Having said that, to start from scratch and use the co-ops as a method that would solve the problems of nationwide access and cost is a tall order."

One reason Dr. Larson expresses hesitance with a national co-op model is that GHC was founded in 1947 and has been able to build up a base of 600,000 covered lives over the years only after a rough initial start. "In the early days, it was ostracized by the community," he said.

Still, Dr. Larson remains a big proponent of co-ops. He notes in particular the fact that physicians don't feel compelled to conduct unnecessary procedures under the member-owned plans.

"Where I was before, we were not encouraged to do transactions over the phone or to use electronic medical records. And here, if you can do as good a job or better without a person having to come in, the incentive is there to do that."

Some said Rockefeller and other critics are too focused on a public plan option to give fair consideration to co-ops.

"Cooperatives are not antiquated. They are a viable and tangible business model which services their members in a manner consistent with their needs," said Al Wearing, sales and marketing director for the Group Health Cooperative of South Central Wisconsin. It has been operating for 33 years and has roughly 55,000 members.

"In some respects, Sen. Rockefeller is correct in that just creating cooperatives would not solve the fundamental problems of delivering health care in this country, just as the public plan option has little chance of resolving the primary issue," Wearing said. "The fundamental issue here is the cost of medical care. All of the legislative proposals offer solutions to access, but there never seems to be any true understanding of the costs."

Co-ops as a compromise

Some policy experts said a national co-op model could be a manageable and efficient system if the government made certain changes in the way they treated the programs.

"This is not an issue of corporate structure or insurance regulation, but really a question of tax policy," said Ed Haislmaier, senior research fellow in the Center for Health Policy Studies at the Heritage Foundation, a conservative think tank based in Washington, D.C. "To the extent that the public feels it's a good idea, they may go there, because some mutual insurance companies have done very well."

The American Medical Association has signaled some openness to the concept of co-ops. "A co-op could be a good compromise," said AMA President J. James Rohack, MD. "More than two decades ago, physician delegates to the AMA voted to support co-ops. While the co-ops under discussion may not exactly match the original concept supported by AMA physicians in the '80s, the underlying rationale -- to help extend affordable coverage to as many people as possible -- remains the same."