"Conrad Proposes Co-ops To Replace Public Plan"
In a closed-door meeting yesterday with members of the Senate Finance Committee, Sen. Kent Conrad (D-ND) proposed replacing a public health care plan with a non-profit cooperative “that would have the same plans and would be subject to the same standards [as private plans].” “That would provide an alternative to for-profit insurance companies, so that there’s a different delivery model for competition,” Conrad explained.
The New York Times’ Robert Pear writes, “the public plan might take the form of an insurance cooperative, owned and operated for the benefit of its members — individuals and businesses with fewer than 10 employees. This proposal, floated as a compromise, seemed to intrigue Republicans who were familiar with cooperatives that market electric power, telephone service, milk, wheat and other commodities”:
“The strength of this proposal is that it accomplishes much of what those who want a public option are calling for — that is, something to compete with private for-profit insurance companies,” Mr. Conrad said. “On the other hand, it meets the objections of many Republicans and some Democrats as well. The co-op is not government-controlled.”
According to an outline of Conrad’s proposal, obtained by the Wonk Room, the “consumer health cooperatives (co-ops)” would operate “at the state level or regionally” to “provide a non-profit, non-government, consumer-driven coverage option in every state to deliver maximum value for consumers.” “The democratic nature of co-ops could encourage increased quality and appropriate utilization and could help foster care integration and other delivery system reforms,” the outline states:
- Co-ops would be required to be non-profit
- Co-ops would provide a coverage option for individuals and micro-businesses (< 10 employees)
- All exchange rules and state laws that apply to other plans also would apply to co-ops
- Strong governance standards would be required to ensure a strong consumer focus and democratic structure.
Generally, cooperatives allow small businesses and individuals to “realize the advantages that large employers enjoy because of their size and bargaining power.”
Small businesses and individuals could purchase health coverage collectively and “strike a better deal than they would by acting separately.” But as a Commonwealth brief points out, most co-ops have difficulty fulfilling their goal of offering small employers and individuals a choice in health plans and reducing costs. That’s because to attract a wide array of health plans and exert purchasing power (bargain on behalf of its members), co-ops must enroll large numbers of employers. But without the ability to “offer substantial choice among well-known health plans, it is difficult for co-ops to attract enrolless, who are drawn to co-ops in part because of their ability to offer such choice.” In other words, it’s the classic “chicken-or-egg” dilemma.
Presumably, Conrad’s co-ops would act more like health care plans and less like health insurance exchanges. Unlike the traditional co-op which strives to give its members a choice of plans, Conrad’s co-op might either self-insure or contract out to a third-party administrator. But state-based or regional co-op health plans would be unable to exert the purchasing power of a Medicare-like public option. Whereas a public health care plan could use Medicare’s leverage and Medicare-like prices to negotiate lower prices and — through the miracle of head-to-head competition with private plans — push insurance companies to negotiate more aggressively with providers and dramatically lower health care spending, a cooperative will likely lack the clout to demand lower prices.