Experts weigh in on nonprofit healthcare cooperatives
Reuters.com asked members of our expert panel on healthcare reform what role, if any, nonprofit cooperatives should play in healthcare reform policy? Here are their responses:
(Updated at 14:35 ET on July 30 to include Ted Okon’s view.)
The idea of nonprofit cooperatives being able to compete effectively with the cartel of large for-profit insurers that dominate the market today is so naive one has to wonder if the legislative language proposing their creation was written by insurance company lobbyists.
The proposal, sadly, reflects a shocking lack of understanding in Congress of how the health insurance industry now operates in the United States. Over the past 15 years, seven for-profit health insurers have become so large that one of every three Americans is enrolled in a plan owned and operated by those seven insurers. The consolidation in the industry has also resulted in 94 percent of insurance markets in America being controlled by a handful of big insurers, often just one or two in many of the country’s biggest metropolitan areas. This means that other insurers cannot enter the market and expect to be competitive.
If large, profitable insurers cannot enter markets dominated by competitors, cooperatives, starting from scratch, wouldn’t have a remote chance of succeeding. Creating co-ops instead of a national public insurance option that actually could compete with the big insurers would be a gift to the industry.
Leading Democrats on the Senate Finance Committee have expressed cautious optimism that they’ll be able to attract bipartisan support for their reform effort by substituting “nonprofit health cooperatives” for the highly controversial public option. The federal government would provide states with the seed money — some $6 billion — to set up state-based or regional co-ops.
But don’t be fooled — a nonprofit health cooperative is little more than the public plan by another name. Both would be government-funded. Both could offer policies in multiple states, outside the purview of state insurance regulators. And both would sound the death knell of private insurance by tilting the playing field irrevocably in the government’s favor.
After all, not only would private insurers remain governed by unique and often burdensome regulations in each of the states. They’d also have to compete against government-funded co-ops that would have the implicit financial backing of the federal government — and thus could charge artificially low rates without risk of insolvency.
If they have any hope of preserving individual choice in health care, lawmakers should refuse to cooperate with these cooperatives.
Dr. Steffie Woolhandler and Dr. David Himmelstein are both associate professors of medicine at Harvard Medical School and primary care doctors at Cambridge Hospital. They co-founded Physicians for a National Health Program. The views expressed are their own.
The proposed cooperatives would add nothing useful to the healthcare landscape. Stripped of the resources that government would bring to the table, they would be under-resourced competitors sure to be swamped by powerful private insurers. The cooperatives under discussion in Washington would be small scale insurers, whose small enrollment would guarantee high administrative costs because the costs of computers, claims processing offices, utilization reviewers etc. would be spread over a small number of patients. And they would lack the resources to effectively compete by marketing to attract healthy, profitable patients and avoid the sick, unprofitable ones.
Local and regional nonprofit health insurance cooperatives have been offered as a solution to the near monopoly power of private insurance companies. Unfortunately, history and market economics stand against cooperatives as an effective solution. First, we forget that we have already been down the road of having nonprofit entities control the healthcare market and have failed. Second, our country does not run by having nonprofit entities produce effective, cost-efficient products. Nonprofits are effective as advocates for causes but not as producers of products. The cost and expertise needed to create a cooperative that could compete with well-entrenched competitors would be prohibitive.
A better solution to the problem is a nonprofit entity running a tight insurance exchange that lists all insurance products and options in an easy-to-understand and transparent manner. Concurrently, local and regional markets need to be investigated to break monopolies where they exist and allow more competition by lowering barriers to entry.