Lawmakers debating an overhaul of the U.S. healthcare system are focusing on proposals that would form healthcare cooperatives to help provide medical coverage.
The co-op idea gained currency this week after statements from senior White House officials that the Obama administration might be willing to drop its insistence on a government-run health insurance option in favor of nonprofit co-ops.
Here are some questions and answers about how health insurance co-ops would work:
Q: WHY HEALTHCARE COOPERATIVES?
A: Senate Finance Committee Chairman Max Baucus, a Democrat, is trying to forge an agreement with Republicans on the healthcare overhaul. But the two parties strongly disagree on one major item sought by President Barack Obama: a new government plan that would compete with private insurers.
Democrats strongly support the public option plan, saying it would inject much-needed competition into the insurance market. Republicans strongly oppose it, saying it would drive private insurers out of the market and lead to a government takeover of all U.S. healthcare.
Senator Kent Conrad, a Democrat, proposed creating nonprofit, member-operated health cooperatives to compete with insurers. The idea has gained strength and is likely to be part of the package that is being drafted.
Q: HOW WOULD IT WORK?
A: The government would offer start-up money -- Conrad said $6 billion would be needed -- in loans and grants to help doctors, hospitals, businesses and other groups form nonprofit cooperative networks to obtain and provide healthcare.
The cooperatives could be formed at the national, state and local levels. A temporary government board would help get things started. Conrad said only about 25,000 members would be needed to make a cooperative financially viable. But in order to negotiate competitive rates with health providers, a cooperative would need at least 500,000 members, he said.
Co-op membership would be offered through state insurance exchanges where small businesses and individuals without employer-sponsored plans would shop for health coverage.
The co-ops would function as a mutual insurance company where policyholders would have some ownership rights. Conrad said co-ops could quickly bring health insurance to some 12 million people, which would make this the third-largest insurer in the country.
Q: WHAT ARE THE ADVANTAGES?
A: Democrats say co-ops would will provide more competition to private insurers and help drive down premiums. For Republicans, they offer a non-government-run means of providing more choice in the insurance market. Some centrist Democrats would be more comfortable voting for the health cooperative idea than a new government plan.
Co-ops operate throughout the U.S. economy. Credit unions are member-owned cooperatives that compete with commercial banks. Co-ops have also been used to provide electricity and other services to rural areas. Conrad notes that dairy food producer Land O'Lakes, Ace Hardware, and the outdoor gear retailer REI are all co-ops. Washington state has a Group Health cooperative with more than 500,000 members and others operate in California and Minnesota.
Q: WHAT ARE THE DISADVANTAGES?
A: Many Democrats worry that co-ops would be too weak to provide any real competition to the private insurance industry. Public plan advocate Senator John Rockefeller points out that healthcare cooperatives have been tried in the past to provide medical care to rural areas. Thousands were formed and almost all of them failed.
Conservative critics argue that the co-operatives would just be another form of government-run insurance because of the role the government would play in setting them up and overseeing their operations.