Weighing the Public Option V. Health Care Cooperatives

Because of increasing pressure from both the right and left, Congress is in the position of either a public option for health care reform, a private health care consortium/cooperative, or not doing either and adding a trigger mechanism that would kick in if the private sector failed on benchmarks to ensure all Americans have access to affordable health care. I have written about the public option in general and will compare the benefits of it against the cooperative and exchange options. Finally, I will discuss the trigger option.

According to Consumer Watchdog.Com "a carefully constructed “public option” to private insurance would provide an antidote to the market consolidation that has propelled premium increases and administrative inefficiencies, shrunk coverage and degraded quality. However, it can only succeed if it:

• Provides all Americans access to the largest risk pool possible. Universal access to Medicare provides the best option.
• Includes new regulation of private insurers to level the playing field with the new public option–namely guaranteed issue, community rating, and a guaranteed base benefit.

The option to join Medicare, regardless of age, would be beneficial to Americans because by almost every measure, Medicare is cheaper and more effective than private plans, according to government and academic research. For example, Medicare spends 2% of revenue on overhead; private insurers typically spend 25% to 27% for overhead and profit."

Opponents of the public plan say that the public option would drive private insurers out of business. However the Congressional Budget Office estimates that no more than 10 or 11 million people or 3.6% of the current US population would be enrolled in any public option by the year 2013. The only private insurer that would be driven out of business would be those that are offering marginal plans to those without insurance right now. Hardly seems like a loss, particularly from a consumer's perspective.

The cooperative model as proposed by Sen. Kent Conrad could be formed statewide or in geographic regions. They would be the insurer that would contract directly with health care providers, and like Group Health, would be self-governed by an elected board. Startup money could come from the federal government through grants or loans. At present, there are two such co-ops in the US, Group Health Cooperative of Washington and Health Partners in Minnesota.

The other type of cooperative or exchange is an insurance cooperative where middlemen would shop for the best insurance rates and options from private insurers and make them available to the public who enroll in the cooperative.

The supporters of the two types of programs insist that the free market will respond better if the government is not involved. Unfortunately, the facts seem to suggest that larger insurers pick and choose where they will insure and the costs of insurance to those in marginal markets are higher than elsewhere. For the health care cooperative there is the additional issue of being locked out by hospitals and doctors who can get a better deal from the health insurer giant in their area.

Those who are not sure any additional competitors are needed, that insurers need to be forced to guarantee coverage even for those with pre-existing conditions, say that what is needed is a government trigger. If private insurers are not providing universal, affordable coverage that then is when other additional options should be considered. On a common sense level this sounds good, but the period of time for the trigger options are proposed to be three or four years into the health care reform plan. This would likely mean that some people could be without insurance for five to seven years.

If the United States is serious about creating coverage options and keeping down the costs of providing care, the mine field of how to cover citizens will have to be crossed. By spreading costs out over more people, all Americans are likely to have lower costs in the longer run.