Co-ops collapsing

By Dave Anderson
Boulder (Colo.) Weekly, Nov. 19, 2015

Recently, some 500,000 people around the country suddenly lost their health insurance as 10 of 23 nonprofit health care cooperatives collapsed. Some 80,000 Coloradans were left in the lurch when Colorado HealthOP collapsed. Nearly 40 percent of the people who purchased health insurance through the Colorado state exchange in 2015 were members of that co-op.

Several more co-ops in other states may close soon. These businesses were established under the Affordable Care Act (ACA or Obamacare).

One of the nation’s foremost experts on health care, Dr. Steffie Woolhandler, said she is not surprised. She’s a primary care physician, professor at the CUNY School of Public Health at Hunter College and the co-founder of Physicians for a National Health Program (PNHP).

On the Democracy Now! program, Woolhandler said “these tiny insurance co-ops were like the peewee football league going against the NFL. They just didn’t have the size to make it in the marketplace.

“But also, they weren’t cheaters. The way the health insurance market works is good guys finish last, and cheaters win. The way you make a killing in the health insurance market is by signing up lots of healthy people, collecting as high premiums as possible and giving them as little care as possible — and, if they get sick, figuring out ways to force them out of the insurance. That’s the way the U.S. insurance market works.”

The “Consumer Operated and Oriented Plans” (co-ops) under the ACA were a compromise. During the Congressional debate over the reform law in 2009, most Democrats were supporting a so-called “public option,” a government-run plan in the ACA insurance exchanges that wouldn’t have to make a profit and would have stronger bargaining powers to obtain discounts from health care providers, enabling it to charge lower premiums than private plans. In a PNHP analysis, Dr. Don McCanne notes that the “public option” was soon emasculated by the private insurance lobbyists so that it wouldn’t be able to effectively compete. Then it became obvious that the option would be killed by Republicans anyway.

At that point, Sen. Kent Conrad (D-North Dakota) proposed creating the nonprofit co-ops which would be included in the ACA. McCanne describes how the private insurers crippled that:

“Insurers require capital — both for start-up expenses and for establishing reserves from which to pay claims. Although the original intent was to provide government grants to the coops, these were changed to government loans which the co-ops would have to pay back (not to mention that borrowing to fund reserves is a shell game — the net reserves are zero). Adding the burden of debt service onto the backs of these co-ops basically destroyed their competitive advantage, especially at a time that they were facing high start-up costs. Further, as an extra measure, the insurers had included in ACA a rule that prohibited the co-ops from advertising. Thus the insurers saw to it that the co-ops were placed at a competitive disadvantage.”

Since going live three years ago, the co-ops have faced huge cutbacks from the Republican-controlled Congress. The GOP has slashed funding by more than half and stopped the Obama administration from helping deal with the unexpected high costs of covering sicker beneficiaries.

The co-ops enrolled many people who had never had health insurance because they couldn’t afford it before. Glenn Jennings, the interim CEO of the Kentucky Health Cooperative, said:

“Many of our members had never had health insurance before Jan. 1, 2014. What happens when people don’t have health insurance? They probably aren’t looking after their health and well-being. They’re probably not seeing providers. If they aren’t seeing providers, they might not be aware that they have chronic conditions. Or, they might be dealing with something that’s acute, but they didn’t have the out-of-pocket funds to get treatment. All this adds up to a lot of people with pent-up medical needs. When they suddenly had health insurance — and again, with many of them having selected a co-op plan — they began using their benefits. When benefits are used, claims must be paid. Kentucky Health Cooperative has paid millions of dollars in claims on the behalf of our members.”

Jennings’ attitude clashes with the perverse and cruel logic of the health insurance market where, as Woolhandler puts it, “good guys finish last, and cheaters win.”

Health care should not be a commodity in a marketplace. It is a human right. Every other developed country has some form of nonprofit health insurance for everyone.

Meanwhile, premiums continue to rise as the stock prices of the for-profit insurance companies are soaring and big firms are being swallowed up by bigger ones.

Next year, Coloradans will be able to vote for a universal nonprofit health care plan. Let the battle begin.

This opinion column does not necessarily reflect the views of Boulder Weekly.