Ross' Crippled And Useless Co-ops

One of the changes that the Blue Dogs demanded be part of the House's health care bill was health insurance cooperatives. Today, Blue Dog Mike Ross' amendment which includes language for the state-based cooperatives passed in committee.

The language about establishing and regulating the the co-ops is good. The entire idea suffers from a single massive problem which will cripple the cooperatives. The amendment states:

the Commissioner may make grants and loans for the establishment and initial operation of not-for-profit, member run health insurance cooperatives (in this subtitle individually referred to as a "cooperative") that provide insurance through the Health Insurance Exchange or a State based Health Insurance Exchange under section 208.

The biggest problem with Ross' co-op idea is that it cripples the state based co-ops in the cradle. By only allowing the cooperatives to sell insurance on the “Health Insurance Exchange” or state exchanges, it will be nearly impossible for cooperatives to ever gain significant market share or negotiating power.

By 2019 the CBO projects that only around 36 million Americans will use the Exchange. That will be only around 10% of the population. Kent Conrad has repeatedly said a health insurance cooperative will need at least half a million members to be able to negotiate competitive rates.

Even if every single person using the Exchange signed up for a same (and only) insurance cooperative in their state, roughly half the states would simply not have enough potential members to be workable. Assuming as many as a third of all Americans getting insurance through the Exchange signed up for the same (and only) insurance cooperative in their state, only the 4 largest states (CA, TX, NY, and FL) would have barely have sufficient membership. If only 15% of people using the Exchange wanted to use an insurance cooperative, no cooperative would likely ever be able to achieve a workable market concentration.

Restricting the public plan to the Exchange was done purely for political reasons. It was done to prevent people from being “force on to government-run health insurance.” Restricting private cooperatives to only the Exchange is just stupid. There is just no way the cooperatives as designed by the Ross amendment will ever be able to provide true competition. The Exchange will need to be expanded dramatically before the idea could even legitimately be entertained. If the Blue Dogs truly want to give health insurance cooperatives a chance of succeeding, they must make them available to everyone.