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There are Co-Op Options for Healthcare, but Major Insurers Don’t Want You to Know

There are Co-Op Options for Healthcare, but Major Insurers Don’t Want You to Know

One of the primary goals of the Affordable Care Act was to make health insurance more affordable for the millions of Americans who had to get insurance on the individual market. The changes in the new law required plans to have better coverage and by requiring everyone to have insurance, spread the risk across a broader spectrum of people to help lower costs. While these changes would help more people be able to get health insurance, the architects of the bill knew that competition within the industry would be a necessary component to help ensure affordability.

During the contentious debate during the creation of the law, there was a big push to include a public option. The most popular idea was to have a ‘Medicaid for all” type of program which would be one of the choices on the insurance exchange along with other private health insurance plans. In between the shouts of death panels and anti-government sentiment, there was little support for such a plan. Still, the Senate tried to create some form of competition and was able to come up with a compromise option.

A Consumer Oriented and Operated Plan, or Co-Op, is a non-profit health insurer designed to offer individuals and small businesses more affordable, consumer-friendly and high quality health insurance options. They are run by boards that are voted on by their members – the consumers. They are licensed by the state(s) in which they operate, and may operate locally, statewide, or in more than one state. Created specifically for the purpose of enhancing competition, they can offer insurance to individuals and small businesses. Beginning with the launch of open enrollment in October 2013, plans offered by co-ops were available as an often less expensive option for consumers in 23 states.

Often focused on smaller groups of people, co-ops can take many different forms. They can consist of farmers, freelancers or started by hospitals and healthcare providers. The provider networks are smaller, and in some cases the providers are salaried, helping to keep costs lowers. Co-ops also try different cost sharing plans, such as eliminating co-pays for doctor visits and rewarding providers that focus on preventative health.

However, many consumers still aren’t aware of them.

Co-ops are offered both on and off the insurance exchanges, but their entrance into the market has been very difficult. Based on the input of commissioned insurance agents and actuarial experts, early drafts of the law included $10 billion dollars in grants. This would help fund startup costs, such as setting up administrative and provider networks, as well as ensure that the co-ops had the necessary solvency funding to handle claims as they built their membership networks. By the time the time open enrollment began, cuts in funding and rigid rules of operation severely reduced the number of co-ops originally planned.

All of which was orchestrated by the for-profit health insurance industry.

As word of the provision spread, the health insurance lobby worked overtime to water it down. Claiming it was unfair competition, they convinced Congress to convert the federal grants to loans and reduced them from the originally recommended amount. The loans are structured so that they must begin paying the startup loans within five years and the solvency loans within fifteen. The tight repayment schedule saddles them with a high burden to overcome in a market where they are already the underdog. Furthermore, the original $10 billion dollars recommended had been reduced to $2 billion by January 2013, making it impossible to fund all of the 40 planned co-ops.

Already hampered by the financial constraints at the national level, many had to face hurdles at the state level. With funding in place with federal loans, they still had to get additional funding from private sources prior to accepting members. As these were a new kind of insurer, state licensing requirements had to be created and were more stringent. Before open enrollment even came around, two co-ops had folded due to being unable to get state approval.

Nevertheless, 23 co-ops have been able to make it onto the market and are selling plans. The bumpy rollout of the Healthcare.gov website rollout slowed enrollment for them, which has hurt the bottom line. Provisions in the law prevents them from using federal loan money for marketing, nor are they allowed to participate in the large employer market.

In other words, they can’t spend money to let consumers know they exist, or participate in the most lucrative insurance market.

As we enter into the final two weeks of open enrollment, co-ops are looking for innovative ways to get the word out about their existence. Some are going door to door, resorting to old fashioned street marketing. Some have gotten private funding for marketing costs. The federal agency in charge of overseeing the co-ops, the Centers for Medicare and Medicaid Services (CMS), has relaxed some regulations in order to help. They can use some of the federal money to educate consumer about their companies, but cannot highlight specific plans. They are also allowed to have one-third of their policies in the large employer market.

Due to these obstacles, co-ops are still a long shot at being a true competitive force in the health insurance market. A recent report shows that at least nine are at risk of financial trouble. Still, preliminary evidence shows that when they are allowed to operate as they should, they can make a difference. In states where successful co-ops are running, costs of policies are averaging about 9 percent lower than states without. They are often the lower priced options on the exchange and have had a comparable share of policies as the other major insurers.

Sometimes the free market does work — which is exactly what for-profit health insurers are trying to stop.

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167 comments

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1:22AM PDT on Mar 17, 2014

thanks

12:42PM PDT on Mar 16, 2014

For-profit insurance = legal extortion

11:06PM PDT on Mar 15, 2014

I just hope Vermont gets their single-payer system right!

12:03PM PDT on Mar 15, 2014

Many Conservatives think it is their lifes work to accumulate wealth or create profit. Neither is true of course. If you can DO either thats fine. But this idea that most everything we do must be profitable is a laughable concept. Thats why our bridges and roads are falling apart. its not profitable to maintain them………so they simply arent doing it.

INsurance used to be a gambling game. WE bet we WOULD get sick and use the benefits……..they bet we would NOT get sick and they would be able to invest your money to make THEMSLVES monday. What has happened through the last 30-40 years is litttle by little the insrance companies have legislated or litigated their portion of the gamble to be almost unrecognizable. Profit is more important than anything. In their zeal to make it so they are even marketing their religions and God to be saying God wants us to be rich. LOLOLOL


9:26AM PDT on Mar 15, 2014

(S)HIT & RUN. Typical redneck. Then end with the immortal words of Einstein, "hahahahah". Can't even spell "imature". Bye, bye.

5:08PM PDT on Mar 14, 2014

ALL systems go through periods of adjustment Laurel. Most of the reason Canadas system is starting to lose money is becauwee the VERY conservative government in charge right now are not funding it at the same way they were. He wants to REPLACE it. In order to do that he has to undermine it. Its not rocket science.

4:04PM PDT on Mar 14, 2014

Laurel ....I Never called you stupid...I said the price you pay per month for health care was atrocious...It is Linda going to have shoulder surgery not me..... and you mentioned the Canadian system as well as the German system Your post March 13 / 14 @ 5:36 AM and then again @ 6:16.....you were commenting on wait times

3:59PM PDT on Mar 14, 2014

Wait Laurel - don't run away now that we've kissed and made up!!!!!!!!!!!!!!!!

For those who have any morality or sense of compassion for their fellow man, UNIVERSAL HEALTH CARE WAS NEVER MEANT TO BE PROFITABLE in ANY nation where it is employed. IT IS MEANT TO PROVIDE HEALTH CARE FOR ALL OF ITS CITIZENS! People are not on earth to make profits for the nasty bastards who prey on their misfortune. When a country spends trillions or more on its military annually but cannot care for its own underprivileged & sick, that nation is an abject failure & a disgrace. Sorry to say it. So much potential lost in those who don't have the money or didn't have a chance to get a break.

3:45PM PDT on Mar 14, 2014

Cont- I went to great lengths to provide personal FIRST HAND experience as a Canadian citizen, patient & medical practitioner of 40+ years.
If you wish to repeat the questions you proposed to which I supposedly did not respond, please feel free to list them specifically & I will respond.
Keep it civil in the future & I will do the same. Thank you.

3:42PM PDT on Mar 14, 2014

ty

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