“Co-op Insurance” Emerges As Alternative To Health Reform Public Plan, But What Is It?

Republicans are reportedly open to providing a cooperative insurance plan as an alternative to a public plan as part of the expansion of health care coverage.

As resistance builds in some quarters against including a public insurance plan option as part of providing universal health care, alternatives are starting to emerge. One variation now eliciting buzz in Washington is the creation of cooperative insurance plans.

As House and Senate legislators start to get down to the nitty-gritty of crafting actual legislative language on health reform, the co-op concept seems to offer two attractions: 1) Republican legislators seem open to at least learning more about it, in contrast to opposing other types of public plans, and 2) depending on its details, a co-op might be more palatable to the biopharma industry, given worries about how a Medicare-like public plan, for example, raises the specter of government price controls.

Although the idea appears to be in its infancy, congressional staffers have begun to discuss a few designs for what a co-op could look like.

The consumer co-op would be non-profit and democratically controlled by enrollees, who would elect a board to oversee operations. Any surplus revenues would either be returned to members or used to increase benefits or reduce premiums and/or cost-sharing. Thus, in many ways, the language used to describe a co-op sounds analogous to a credit union.

The plan would be available through the health insurance exchange for selecting coverage, a frequent element of health reform proposals. Starting up a co-op would require initial seed money, possibly from multiple sources, but the plan would be expected to be self-sustaining after start-up.

Several approaches to the co-op are on the table:

A state-based approach - Seed money would be provided to states for state-based co-ops. State laws, including benefit mandates, would apply to the plans. The law could require that states must have such a plan available by a certain date.

A nationwide approach - Congress would enact a federal charter to license and regulate a non-profit co-op or co-ops nationally. Governance would be prescribed by Congress.

A hybrid approach - The co-ops would operate regionally at the discretion of the states. To ensure availability, the law could require that if a state does not have a state or regional co-op by a certain date, a federally chartered co-op could be created in those areas.

Of course, a number of other questions also remain, including whether the plans should be open to individuals only, or to small businesses or small groups as well; whether the plans are self-insured, or have federal or state backing; and whether existing plans would be eligible to convert to co-op status.

-Scott Steinke ([email protected])