One group of insurers opening for business today under the Affordable Care Act is out to change all of health care: health care cooperatives.
The co-ops are private non-profits offering insurance to individuals and small employers through the new health care exchanges. They emerged as a compromise, after Congress rejected a government-run insurance. They’re meant to compete with larger, commercial insurance companies.
The original idea was to have a co-op in every state, but Congress cut the start up funding, and only 22 co-ops open for business today, with another two expected to be up and running in the next few months.
Co-ops face several challenges, including limits on how they can spend their start-up money from the government. They are not allowed use it for advertising, for example, which presents a challenge in enrolling customers. They also lack the volume which would allow them to negotiate better rates with hospitals and drug companies.
Sabrina Corlette of Georgetown University Health Policy Institute, who thinks co-ops could be a good idea, wrote an analysis for Kaiser Health News lamenting co-ops’ disadvantages: “Unfortunately, the law forces these new plans to compete for market share with one hand tied behind their backs.”
Critics on the right say co-ops will end up wasting taxpayer money.
Despite the constraints, directors of the co-ops are optimistic and excited.
“We’re sort of in the eye of the hurricane right now. But it’s an exciting hurricane,” Janie Miller, CEO of Kentucky Health Cooperative told Kaiser Health News.
“We bring a completely different paradigm to health care finance,” John Morrison, president of the National Alliance of State Health Coops added. “We’re not interested in making as much money as we can. We’re not interested in making profits. What we are interested in is making consumer patients healthy and saving money.”
ROBIN YOUNG, HOST:
And there's another group of insurers that's also opening for business today. They're not getting much attention. These are health insurance cooperatives. These are private nonprofits that are also a - also offering plans to individuals and small employers through the new health care exchanges. We want to get a quick explainer from our friend Jay Hancock of Kaiser Health News. Jay, you say 22 out of 24 co-ops are also going up today alongside the marketplaces. What are the differences?
JAY HANCOCK: The differences is these are - these are startup insurance companies created by the Affordable Care Act. It's a big day for them, just like it is for everybody else involved in the health law. They've never had any customers before, so this is - this is their day to go out and start peddling their wares.
They were intended to be competition for the existing insurance industry, the AETNAs, the CIGNAs, the Blue Crosses, just to add a little bit of extra rivalry and price competition to get prices down for people.
These are, as you say, nonprofit. They're not in every state. In the last - one of the earlier budget showdowns, Congress cut the funding for sort of the other half of the states for these. But they are there. They have very big ambitions, and a lot of people think they have fairly long odds of succeeding, as well.
YOUNG: Well, but they say they already are. The CEO of New Mexico Health Connections, that's again one of these put-together companies that's - the idea is to bring down the cost by competing with the private companies in these marketplaces, the CEO says we're already doing this and also that they have a different mission from the private companies, that they actually are looking for people who are high-risk and ill.
HANCOCK: They are embracing the chronically ill, people who have been on the margins of the system before, and whereas traditionally the model to make money in insurance was you tried to avoid the sickest people that ran up the biggest costs, these folks say that's one thing that makes them different.
They are trying to find people who need coverage, people who see the doctors, go to the hospital a lot. That is one thing that makes them different. It's also another thing - it's also one thing that will make things challenging for them because managing those patients, managing those costs and still keeping their premiums down will be something of a lot of work for them.
YOUNG: Well, but their goal is to find these people, intervene, stabilize them, get them on the right medication, maybe get them out of a system that's really not giving them the best care and get them out of the high-cost hospitals, which they say will bring costs down.
Look, these nonprofit cooperatives are saying they're already bringing the cost down by the competition they're offering, but there's a lot of skepticism. Some Republicans who are against different aspects of Obamacare say these cooperatives are going to lose taxpayer money. I'm guessing that if they haven't - if they're just starting, they had to have some taxpayer money to start up because they don't have the money from subscribers yet.
HANCOCK: Correct, they did receive loans from the federal government for their startup capital. They are required to pay those loans back over a number of years. And we'll see what happens. They have very large ambitions, and there's some really qualified people running these things, former insurance commissioners, for example, really seasoned health policy professionals.
And if they succeed, it will be something of a signal victory for the Affordable Care Act that nobody's really paid much attention to so far.
YOUNG: So Jay Hancock, just fairly briefly, as somebody goes to their marketplace today, should they consider these co-ops? Not proven yet, but should they opt for one of them if the price is right for them?
HANCOCK: If the price is right, and the network looks right, the advice is yes, go look at it, you know, look carefully at it like every other plan. Look at the deductibles, look at the premiums and so forth. But absolutely give it a try.
YOUNG: But try them. Jay Hancock of Kaiser Health News, thanks as always.
HANCOCK: Thank you.
YOUNG: This is HERE AND NOW. Transcript provided by NPR, Copyright NPR.