HCR -- Health Insurance Cooperatives

By John Ballard

Dedicated policy wonks are urged to check out Dr. Timothy Jost's summaries of unfolding provisions of ACA at Health Affairs Blog. In three previous posts he already summarized the outline of "exchanges" and the steps to be followed transitioning from where we are now to where we are going. The industry cannot be expected to wake up one moring and have all the details in place when the full weight of ACA begins to be felt.

Printed out, his three prior posts run to ten or twelve pages.
Here are the links for anyone with an appetite.

• Implementing Health Reform: Health Insurance Exchanges


• Implementing Health Reform: Health Insurance Exchanges (Part 2)


• Implementing Health Reform: Health Insurance Exchanges (Part 3)

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My inspiration for this post is another dimension of the new legislation which I find more promising than the private insurance standardization and improvements, insurance cooperatives.

Cooperatives of various sorts are very common throughout the United States, particularly in rural areas. Cooperatives brought electricity and telephone services to large parts of the United States, while agricultural marketing and supply cooperatives continue to assist farmers to increase their market power in buying and selling agricultural products. Credit unions provide an alternative to commercial banking in many American communities, while food co-ops provide an alternative to chain grocery stores.

Insurance cooperatives were once common in the rural United States. During the 1930s and 1940s, the New Deal Farm Security Administration encouraged the formation of health cooperatives, which eventually served 600,000 rural Americans. The movement was opposed by organized medicine, however, and after the federal government removed its support in 1947, the cooperatives collapsed. Only a few health insurance cooperatives continue to exist, primarily in Washington, where the Group Health Cooperative of Puget Sound is perhaps the best-known exemplar, and in the upper Midwest, where several cooperatives survive.

As the public option debate festered in the summer of 2009, Senator Kent Conrad of North Dakota proposed the addition of a health insurance cooperative program to what became the Affordable Care Act to provide a different alternative to standard for-profit health insurance. The public option concept was eventually dropped from the legislation, but the cooperative idea stayed in and was adopted as section 1322 of the final ACA, which creates �nonprofit health insurance issuers,� referred to here as cooperatives. The hope is that nonprofit cooperatives will be accountable and responsive to their consumer members and model better coordination of care, while introducing competition into local and state markets. The goal is to establish at least one cooperative in every state. The program includes $3.8 billion for start-up loans over the next five years.

This is pie-in-the-sky stuff compared to what now exists. And as a consolation prize for the defeated public option, it may turn out to be even better. If so, for-profit insurance companies may rue the day when together with the for-profit medical community they worked so hard to kill the public option.

Go read what Dr. Jost says and decide for yourself. A non-profit insurance cooperative alternative to the industry we now have is as attractive as the credit union alternative to banks.

Among our family stories is one about a successful tobacco farmer, one of my great uncles, who had enough land and resources to accommodate several tenant farmers and share garden produce at no charge to as many of his neighbors as had need. Although his farm was already equipped with the Delco plant electricity sometimes used in rural America at the time, when REA (Rural Electrification Administration) brought electricity across the landscape my uncle said he wanted to be among the first to take advantage of it, not because he needed electricity  but because he felt it was his duty as a good citizen to support the effort. That kind of thinking seems quaint these days but I have hope that enough doctors and patients will support a renewed interest in health insurance cooperatives.