Health care co-ops floated as an option

President Obama continued his push for health care reform Thursday. He offered new Census Bureau numbers that show more than 46 million did not have health insurance in 2008. During Wednesday night's speech to Congress, the president stated his position on a public option for those without insurance.

"For example, some have suggested that the public option go into effect only in those markets where insurance companies are not providing affordable policies," the president said. "Others propose a co-op or another non-profit entity to administer the plan. These are all constructive ideas worth exploring. But I will not back down on the basic principle that if Americans can't find affordable coverage, we will provide you with a choice."

Co-ops provide goods or services like food, telephone, and utilities at a lower cost and sometimes with better results. But can a cooperative that provides health insurance work as well? Can they compete with private insurance giants like Indianapolis-based WellPoint?

According to WellPoint's Web site , one in nine Americans is a member of a WellPoint-affiliated health plan. That makes WellPoint a powerful giant. The reason why is because hospitals and doctors are eager to join a giant insurer's network because it guarantees patients come in the door. That gives the private for-profit insurance giant the power to negotiate a lower price for services.

Would a small co-op have WellPoint’s power of price negotiation?

Dr. Aaron Carroll, the director of IU's Center for Health Policy and Professionalism Research, strongly believes a small co-op could not compete with private insurance companies.

"All the things that people think would allow a nationwide public option to achieve lower costs would not necessarily be seen in co-ops," Dr. Carroll said.

Studying health care policy is Dr. Carroll's life's work. But neither he, nor Congress, nor analysts can give details on how competitive health co-ops would work because currently there are so few of them.

"Somebody referred to them as a medical unicorn," Carroll said. "Sort of like sounds great, but nobody's really seen it."

So health policy researchers can only speculate about future success. But the government said it would offer $6 billion to help get them started. They would be independently-owned by the members. They would be non-profit. But would they lower costs?

"To achieve any kind of bargaining power, co-ops would have to have hundreds of thousands of people, and that would be difficult to get started from scratch," Carroll said.

Most analysts believe a co-op would need 500,000 members to be truly competitive.

Iowa adopted a law in the 1990s to encourage the development of health co-ops. That experiment has been largely unsuccessful, but proponents believe the non-profits could cut costs if properly run.