Will Health-Care Reform Get Its Own Overhaul?

Once a cornerstone of socialist communities, co-ops are finding a fresh audience in hardcore capitalists that want to keep the government out of health care.

As the national debate over medical insurance reform has intensified, President Obama has indicated the White House may back off its insistence on a government-run public plan. In turn, a plan that would replace a public insurance entity with health cooperatives – consumer groups that would negotiate pricing with medical service providers – has emerged as a potential alternative more palatable to critics.

Any bill that comes out of the House is likely to include a public plan, which is also part of the proposal drafted by the Senate’s HELP Committee. However, the Senate Finance Committee is pushing to include health co-ops in its bill in place of the public model. Sen. Kent Conrad (D., N.D.) is leading the co-op cause and has suggested it is the only option that would win bipartisan support. The co-op plan aims to achieve the same benefits for consumers as a public option would but without government control, Conrad says on his web site.

Health co-ops are not a new concept. Washington State and Minnesota have co-op groups. And the idea dates back at least as far as 1930s and ‘40s, the heyday of the cooperative movement in the U.S., says Timothy Jost, a professor at the Washington and Lee University School of Law who has written on health-care regulation. The movement failed largely because the co-ops were small and undercapitalized, he says. (The Blue Cross/Blue Shield insurers also began in the 1930s and shared some of the characteristics of co-ops. But over time they began to look more like the private insurers they competed against, Jost says.)

Other co-operative models Conrad has held up as proofs of concept include electricity co-ops that operate in rural areas, Ace Hardware and REI, the outdoor clothing and gear retailer whose members get an annual dividend (typically 10% back on eligible purchases).

What would it take for health co-ops to work on a national scale today? We spoke to health-care policy experts to find out more about the prospect of co-ops as a health-insurance option.

How would a health co-op work?

Co-ops would function as member-owned nonprofit groups offering insurance to its members. They would be controlled by consumers rather than the government and would perform the same functions as a private insurer. In effect, the co-op would be the insurer: It would negotiate rates with medical providers and settle on premiums to charge members. And like a mutual insurance company, members would have some ownership rights, like being able to choose board directors, says Robert Field, a professor of health management and policy at Drexel University’s School of Public Health.

In theory, the co-ops would operate on a health insurance exchange and be subject to the same regulations regarding minimum benefits.