Co-Opting Public Plans

Published on

If the public plan option is dead—and many members of Congress and virtually every political observer say it is—President Obama may instead press for the creation of local health insurance co-operatives so he can declare victory in the healthcare reform war and go home.

The problem is that a lot of people believe co-ops create as many problems as they hope to solve. For starters, nobody knows if co-ops would work. Or how they’d would work, who’d be covered, how much they’d cost, who’d pay the bills, who’d provide oversight, and how they’d compete—if at all—against entrenched private health insurers that dominate their local markets.

Blogger Bob Laszewski—who calls healthcare co-ops the "single dumbest idea" he has heard in 20 years of health reform debate—notes that even if all those questions are answered, and cooperatives flourish, the end product would at best very much resemble the scores of community-based, not-for-profit health plans—including many Blue Cross Blue Shield plans—that already control more than half of the under-age-65 market in the United States.

Julius Hobson, a senior policy advisory at Bryan Cave LLP consultants, says it’s difficult to see how the co-ops, with limited financial resources, few if any members to start with, and therefore no negotiating leverage, can hope to be competitive with large, wealthy health insurance companies that are virtual monopolies in some areas of the country. "If you look at a state like Pennsylvania, Blue Cross Blue Shield controls 90% of the market. There are two Blues in the state and they don’t compete with each other. One has the eastern half, one has the western half. Tell me how a co-op is going to compete with them on price? How are they going to crack that market?" he asks.

Consumer Watchdog calls the co-ops "pseudo-reform" that could do far more harm than good if they create loopholes that could gut state consumer protection laws. The consumer advocacy group notes that Sen. Mike Enzi, R-WY, came up with a similar plan in 2006, which would have exempted the co-opts from state consumer protection laws.

Hobson, a former lobbyist with the American Medical Association, says the co-ops could gain favor with shaken Democrats returning from raucous town hall meetings in their districts and facing across-the-board opposition from Republicans. "The Democrats will go to the fallback position of the budget reconciliation process, where they only need 51 votes, and they will pass everything they can under those circumstances. Republicans will scream and yell and say that is a dirty way to do things, but in 2001 they enacted the Bush tax cuts the exact same way," he says.

Co-ops might not do anything more than provide political cover for President Obama and Congressional Democrats, who don’t have the 60-vote, filibuster-proof majority needed in the Senate to pass a public plan. But, Hobson says, President Obama and Congressional Democrats have too much invested in health reform to walk away empty handed. "They are going to have to cut back on the size of this bill because they aren’t going to get any Republican support and the co-ops could happen as a result of that," Hobson says. "I am absolutely certain they will pass something by the end of the year. The president will sign it and they will declare victory."

John Commins is an editor with HealthLeaders Media. He can be reached at [email protected].

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

Latest Videos

Latest Releases

In The News

Latest Report

Support Consumer Watchdog

Subscribe to our newsletter

To be updated with all the latest news, press releases and special reports.

More Releases