What are health care co-ops?

Here is one quasi-answer:

But so far, cooperatives have been defined in the health-care debate
primarily in terms of what they are not: They would not be run by the

That may make the cooperatives more politically palatable to
conservatives, as well as to some Democrats such as Conrad, who fear
that the public option may be a bridge too far. But it also presents
new challenges: Cooperatives would face potentially greater difficulty
getting off the ground and obtaining discounted rates from doctors and
hospitals, observers say.

Whether this would end up as a public plan under a different name, I cannot say and indeed it seems that maybe no one knows.  Ezra Klein tries to clear up some issues

I am in any case puzzled by the topic.  If, say, rescission is a major problem, why do not health insurance customers seek out health insurance mutuals or co-ops, both of which offer the possibility of greater consumer control and thus less opportunism from the supplier. 

Note that mutual banks were quite common before the rise of deposit insurance and mutual life insurance companies played major roles in the history of the industry.  So mutual and co-op forms can arise when the market agency problem is severe.  Why don't health insurance mutuals or co-ops take over the sector today for that matter?  But hey, wait, Blue Cross and Blue Shield do in fact have long histories as co-ops.

So what went wrong?  If you read the Mark Pauly quotation on p.2 of the first link, it seemed that health care customers did not in fact end up controlling the co-op (or mutual).  The managers ran the show in their own interest.  Maybe so, but then will health insurance customers do so much better controlling or influencing a government-run plan?

There is thus an unusual implicit claim on the table.  It runs something like this: decisive customers, with exit rights, cannot control a health insurance co-op.  Those same individuals, in their roles as voters, being non-decisive, and with fewer exit rights, can control a government-run health insurance system, co-op or not.

I can think of some models in which that claim is true, but I would not want to go to the mat for them. 

Here is someone else asking why we don't buy health insurance from mutuals.  It's an underexplored question.

Addendum: Mark Thoma makes some excellent related points.


Some points:

1) Generally democratic mutuals tend to suck. You get a few buisybodies who ruin it for everyone by pushing for absurd rules....
Q: Think of it this way a home owners association is a mutual of sorts, who tends to have the biggest influence in those?
A: The people who want to make crazy rules and restrict everything.

2) Mutuals only work when the goals and survival of the organization and the goals of the workers/customers are in alignment. They often aren't. Hugo motors is a good example of one of the failure modes of this kind of org.

3) Voting is stated preferences often to a nonexistent ideal, versus exit/entrance which is a revealed preference to an actual thing.

4) What makes you think that a government run plan won't have the same problem of the managers running the show to the detriment of the customers? I think it all has similar failure modes. This is particularly true if the co-ops are a monopoly or are regulated to be undifferentiable so really we have just one possibly plan.

5) The proponents of this bill have stated that they wish to have a monopoly single payer system. Most americans don't want this. One way to achieve it is to regulate health care to be a horrible disorganized state run system while calling it a "free-market option" then say, "oh the free-market system doesn't work, lets switch to a more organized system."

6) There is no six.

7) The parties most interested in the democratic mutual (people with very expensive illnesses, the managers and the employees) will effectively run the democratic mutual, while everyone else just nods their head and goes along.

8) "Those same individuals, in their roles as voters, being non-decisive, and with fewer exit rights, can control a government-run health insurance system, co-op or not." I agree with you, its a pretty terrible statement. Its particularly bad for a single payer system, because... seriously... they expect a monopoly to be more responsive and good to customers than someone who has to compete for them? Thats absurd.

Oh, and HCSC (Health Care Service Corp) which runs Blue Cross/Blue Shield of New Mexico, Texas, Illinois, and Oklahoma, is also a mutual.

I think the concept of mutuality is worth reconsideration, particularly in the light of the meltdown and failure of financial regulation. I'm not sure about its applicability to healthcare, particularly in the US - but technological developments around Open Source seem to offer a new lease of life for what in the UK has always been a small but distinctive aspect of the economy. I've written about this recently - Mutuality 2.0 http://www.opendemocracy.net/article/email/mutuality-2-0-open-source-the-financial-crisis

People come up with new buzz words and think they've changed the math. A non-profit insurer actually makes a profit of exactly zero. I'm also tired of this idea that we will have rationing no matter what. Rationing and scarcity are not the same thing. The profit motive gives the incentive to make profit with the float, which if it happens results from capital allocation, and can then be applied to subsidize losses.

Changing the name of the street sign doesn't alter the fact that we've been down this road before. What happened a few turns ago? Isn't support for a co-op a critique of 'employer co-ops' which came about due to government price controls?

A co-op that did not deal with out-of-pocket costs or end-of-life care could be pretty small, I'll start the bidding at 100 people, but it would still have to be big enough to do something smart with the float.

A: The people who want to make crazy rules and restrict everything. ... 2) Mutuals only work when the goals and survival of the organization and the goals of the workers/customers are in alignment.

Doc Merlin gets these exactly right.

I've been a member of two co-ops, both with more than 1,000 members. One a consumer co-op (groceries, in a supermarket-sized store) and the other a producer co-op (transportation, with more than 400 taxis). Both ended in bankruptcy.

A large part of the problem in both cases was the more "passionate" members drove the agenda, and another large part of the problem was that the organizations could not respond rapidly to changes in the business environment - when it came time to vote on major decisions, it was either too late or there were large blocs of members whose divergent view points resulted in deadlocks.

Ag co-ops generally work (used to work?) because member's outlooks, problems, and interests are similar.

"If, say, rescission is a major problem, why do not health insurance customers seek out health insurance mutuals or co-ops, both of which offer the possibility of greater consumer control and thus less opportunism from the supplier."

Imperfect/Asymmetrical information. Leaving aside the employer insurance market (which presumably is smarter than the personal market, but has its own misaligned interests) most people understand that insurance companies will be a pain in your rear if you get sick - but they don't expect the drastic action of rescission. (For that matter, I doubt many think its legal.) And they're not likely to have direct knowledge, as no one rescinds when you're healthy and paying - its when you're in the sickest 1% - the reason you bought insurance! - that you've got a 10% - 50% chance of having insurance pulled out from under you (based on RortyBomb's stats).

So if we go back to the turn of the century when the first health co-ops were founded (Moose, Elk, etc.) we find that the AMA found them to be contrary to the larger groups goal of maximizing member profits and killed them through non-cooperation. So what has changed that this will be acceptable to the AMA now?

One of the stated goals of the public plan is to have something large enough to compete with private insurance companies so that the competition will drive down insurance prices for everyone.

I do not see how insurance co-ops will accomplish this goal.

If a co-op plan passed with a mandated insurance requirement, won't the result be a big win for the insurance industry:
No real competition + mandated insurance = big profit$.

Our current hydraulic funding of health care with phony pricing schemes designed to maximize reimbursements has driven providers to have more finance people than medical people on staff. Anyone who has ever had an inpatient hospital expense where the bill might be $20,000 to start and is then discounted to $4000 by Medicare or private insurers, knows that this system is broken.

Hrmm, I seem to have typoed.
Although it was probably obvious to everyone, I meant Yugo not Hugo.

Non-profit Blue Cross Blue Shield dominates many states with 50 to 70 percent market shares. Rent-seeking implies that the 'new' coops policy dumps more people into the BCBS networks. Rather than competition, we'll get more concentration with concomitant increases in costs. A better policy would break the BCBS dominance and encourage cross-competition, reform torts, and allow real insurance options. By real insurance, I mean policies against catastrophic losses as opposed to the pre-paid medical plans we now have. Most importantly, get the Feds out of medicine but privatizing Medicare and letting the states have Medicaid. Otherwise, pass a Constitutional amendment to bring the Constitution in line with Medicare.



Isn't it true that most health care organizations, whether they started as mutuals, or as public for-profits, have been taken over by their full-time ostensibly hired management? (And isn't that true for many other organizations?) Isn't this a fundamental problem for our economy and political system?

I'm going to go with the competing incentives story. A for-profit health insurer's real customer is your employer, not you. A national co-op (or public option) would be accountable to voters, politicians and so on.

Also, any discussion about the shortcomings of co-ops needs to include a comparison with what we have now. We're currently spending 17 percent of our GDP, and 47 million Americans (and counting) aren't covered.

"Those same individuals, in their roles as voters, being non-decisive, and with fewer exit rights, can control a government-run health insurance system, co-op or not."

We have a local radio personality near here who continually exhorts us, "If you don't like what's going on, vote them out." This would be effective except nearly half of the voters don't pay taxes and are the beneficiaries of the free programs. Their self-interest encourages them to vote for the "free" program regardless of the expense to the tax-paying population. Added to these are the true-believers who think government is always the answer results in a majority on most welfare questions. With the liberals and leftists controlling the executive and legislative branches as well as most of the media, "...voting them out" is an uphill, likely insurmountable, battle.

With the built-in autonomy for the bureaucracy in the current bill, control of the government option by the public is not very likely.

The economics of each state differ, depending on population, geography, government, and history. One national system applied to all states removes the motivation for local creativity, which is where economic efficiency can occur. Co-ops may work very well, especially in areas where other types of co-ops are successful (think farm co-operatives). But they should not be the only solution.

The bottom line of healthcare is that it is now cheap. Diet, exercise, not smoking, immunizations, occasional testing, and education are at its core. The most expensive parts are the uncertainties and waste due to inefficiencies and the human costs of those who are barred from access due to structural lines. Healthcare is not even well-defined. For example, eldercare, a huge cost, is not even included in medicare (but medicaid often makes up for that).

meaning that more premiums come in and meaning that competitors need more capital to enter the market and thus the co-op succeeds in stifling competition. But it's all good because they don't make that nasty thing called profit.
Stifling competition?? Private Health Insurance is nothing but a MIDDLE MAN. We're not talking about an industry like technology, where ingeniuty/innovation/progress DEPENDS ON competition, and where profits serve to fund R & D, and to purchase necessary resources/materials to create new/better products.

Private insurance is also WAAAAY more bureaucratic than medicare has ever been. Because bureaucracy is what they do for a living. So unless they are using their profits to streamline administrative practices and reduce costs, why SHOULD THEY be reaping the kind of obscene profits they have been reporting for the past 10 years. I'm not against profit, I'm just against profit that doesn't come back to SERVE the consumer, in some way, shape, or form.

If I'm just paying to congratulate someone for pushing papers all day - forget it LoL. I'll take the co-op. And as far as the monopolization by co-ops, that's exactly what's been happening within the private health insurance industry.


If they both end up in monopolies, and neither one really works FOR the customer, then which one do you think I will choose: the monopoly that does nothing for me AND makes someone else filthy stinking rich, or my own health regimen and an HSA? LoL

See what I mean? Co-ops may not work, Public Option may not work, but neither one of those things vindicates the status-quo. I think defending what we have now is to stand for the wrong thing.

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