Wednesday, August 5, 2009

Health Care Co-Ops

Rick Martinez has a column on health care co-ops in today's News and Observer. Co-ops are an attempt to develop a compromise between persons wanting a public option in a new system, and those desperately opposed. A co-op would presumably be a health insurance plan offered in a state and organized as a non-profit organization.

I think he is onto something when he says that liberals intuitively distrust insurance companies, and conservatives intuitively distrust anything government. No evidence to the contrary will sway either side. So, a co-op might offer a chance at a compromise. I would favor a public option in the context of the current debate, but I am not opposed to considering co-ops, though I am not sure that co-ops will work. Here are some general thoughts I had as a I read his column, and think about the public option v. co-op v. neither option.

*He uses the example of electric co-operatives in North Carolina. Howver, electric co-ops are monopolies, just like for profit electric companies. When I lived in Carrboro during graduate school, I got power via a co-op but am pretty sure I had no choice in the matter. If you lived at my street address you got power from the Co-op, or read by candle light. A co-op in the health insurance context would be just one option for an indivdiual to choose, just like a public option would be one choice. So, if electric co-ops have to serve members well, all the moreso that health insurance co-ops would do so because they are not guaranteed customers. This would argue in favor of co-ops.

*A co-op in health insurance wouldn't be able to take advantage of some of the scale benefits that a public option would have. Similarly, one knock of co-ops is that they don't have the profit motive that for profits do which would theoretically spur efficiency and which might mean they have trouble getting needed capital to start up. This would argue against co-ops, because they may not be robust enough to compete with private insruance companies.

*For competition to be fair and square, you would have to ensure that either a public option or co-op didn't get any more financial support other than premiums flowing based on consumers choosing those options. This is a legitimate concern for private insurers regarding a public option (or a co-op).

*Mr. Martinez notes that co-ops have more independence from governement than a public option, but that they will still have a degree of government involvement....this is an understatement generally in the insurance system. For profit (and not for profit) insurers currently have a big degree of government involvement via the tax exclusion of employer provided insurance premiums. No one in the health care business is free from government due to this huge tax subsidy of private health insurance.

*He ends his column with a puzzling sentence..."The last thing health care reform needs is a public option that offers little to no choice." It is public OPTION. No one has to choose it. It is just one choice. In fact, it is a little surprising that persons who truly think that government always gets everything wrong (not saying he says this, not sure if he thinks that or not) aren't actually salivating at the chance for there to be a public option....that might ultimately lose out and not get many subscribers. This is a big chance for private insurance companies to defeat a government plan head to head. No one has to sign up for it under any bill or idea being discussed. If private insurers make mince meat of public option fair and square, who knows, maybe the next step could be repeal of Medicare?

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