The Co-op Model Would Mostly Suceed in Protecting the Insurance Industry

Posted by Digby, Hullabaloo at 9:53 AM on August 18, 2009.

If you're going to create a substitute for the public option, it would be a good idea to know what it actually does before presenting it to the nation as the substitute.

The White House has indicated that it could accept a nonprofit health care cooperative as an alternative to a new government insurance plan, originally favored by President Obama. But the co-op idea is so ill defined that no one knows exactly what it would look like or how effectively it would compete with commercial insurers [...]

As the debate rages, lawmakers are learning that creating cooperatives — loosely defined as private, nonprofit, consumer-owned providers of health care, much like the co-ops that offer telephone, electric and other utility service in rural areas — will not be easy.

The history of health insurance in the United States is full of largely unsuccessful efforts to introduce new models of insurance that would lower costs. And the health insurance markets of many states suggest that any new entrant would face many difficulties in getting established.

Here's some more good news: Kent Conrad, the brainchild of this idea, admitted today that co-ops won't bring down the cost of premiums for individuals, unlike the public option. Which would be the point.

ROBERTS: What would they do to reduce costs? Because that is one of the central issues of health care reform.

CONRAD: Well, the important thing is they’d provide more competition. … Beyond that, I think it’s very important not to over-promise here. [...]

ROBERTS: So nothing really in driving down the costs of service then?

CONRAD: Uhhh, no. If you believe competition helps drive down costs, then they would certainly contribute to holding down costs.

A note on how these would affect "competition" - in Conrad's home state of North Dakota, Blue Cross Blue Shield emcompasses almost 90% of the health insurance market. And they're a non-profit that thinks they can qualify as a co-op, under Conrad's rules, making them eligible for some of the $6 billion in seed money, I presume. Amazing that Conrad's plan and the dominant insurer in his state match up almost perfectly, ain't it?

The co-op model should be seen for what it is, protection of the insurance industry. Which makes sense, considering how many Senators are in bed with those interests, in some cases quite literally. And given that the industry and their Republican representatives in Congress will STILL oppose co-ops, learning from the lesson that making a ruckus will cause Democrats like Kent Conrad to give up whatever benefit to the people can be managed in exchange for nothing, you can pretty easily see an outcome where even the weak co-ops are given no ability to come into existence, the way it happened in Iowa:

In the 1990s, Iowa adopted a law to encourage the development of health care co-ops. One was created, and it died within two years. Although the law is still on the books, the state does not have a co-op now, said Susan E. Voss, the Iowa insurance commissioner.

Wellmark Blue Cross and Blue Shield collects about 70 percent of the premiums paid in the private insurance market in Iowa and South Dakota.

Conrad keeps saying that there aren't the votes for anything but his favored idea, but no Senator has come out and said they would join a Republican filibuster of health care reform under any circumstances. Until we reach that point, 60 votes - and maybe some combination of the Maine two - remain in play. Sounds like a better scenario to me than one where 60 House progressives have already said they won't vote for anything without a public option. Mr. Emanuel, are you paying attention? Are you doing the math? Or are you reading the LA Times ?

Tagged as: insurance, obama, health reform, co-op

Digby is the proprietor of Hullabaloo.