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Health Care Cooperatives–An Old New Idea–So What’s a Blue Cross Plan?

6a00d8341c909d53ef01157023e340970b-pi As opposition to a Medicare-like public health plan option grows, there has been a lot of talk about the compromise idea of creating not-for-profit health insurance cooperatives
that would compete on a level playing field with existing private
insurers. The reasoning goes they would keep the existing insurers
"honest" by introducing a new element of competition.That's a great idea.And it was a great idea 60 years ago when the first Blue Cross plans were established.

What's
the difference between a not-for-profit health insurance cooperative
and all of the existing not-for-profit Blue Cross plans?In
April, I discussed the notion that such not-for-profit state driven
plans already exist in other forms and haven't accomplished a lot in a
post: A Public Health Plan That Looks Just Like a Big HMO—Why?Proponents
of this compromise co-op idea often point to health plans run by states
for their workers as an example of the government already running
efficient health insurance programs. I noted that 30 states already
have a similar health plan model combining medical self-insurance with
commercial networks—usually Blue Cross networks—to operate a publicly-run health plan for their state workers.I
also discussed similar models set up by states to provide state-run
workers' compensation programs in direct competition with the private
workers' compensation insurance companies:

I don’t
know of any of these state self-insured plans that are generally
getting better results than the typical large private employer’s
self-insured plan—or any commercial health plan. And why would
they—they are just large self-insured employers using the same
commercial networks the ERISA market uses. CalPERS, the biggest for
example, has a partnership with California Blue Shield and the last
time I looked their costs weren't anything to write home about compared
to the typical Fortune 100 employer.

Just which state employee
plan is a model for reducing health care costs, ridding the system of
unnecessary services, and measurably reducing the "premiums" it charges
its sponsors and employees?

But, you might argue, these state
plans have expense ratios far less than the existing individual and
small group market. Sure they do–just like a typical large employer.
Now add the cost of servicing individuals and small groups and why
would they be any less expensive than a private plan offered in the
same "Insurance Exchange." They don't have to make a profit, one might
argue. Really? A public plan would have to develop the same
stabilization reserves any existing not-for-profit health plan has to
build for in the down years.

There actually are plenty of examples of government going into the insurance business on a level playing field basis with the private sector.
There have been a number of state workers’ compensation funds over the
years as well as state sponsored physician medical malpractice
funds—usually built at a time when the private sector was not creating
adequate market capacity for even average risks. [I am not pointing to
high-risk pools here but state sponsored insurers aimed at the
mainstream market.] All of the ones I know about ended up looking
exactly like the private players. The fact that none of them ever
dominated the market is testament to just how similar, or ineffectual,
they turned out to be compared to their private market cousins.

As an example, I would point you to the California State Compensation Insurance Fund.
Founded in 1914 by the state legislature, it is a workers' comp
insurer. In the mainstream market the Fund looks, acts, and underwrites
just like the private players. California has always been a problematic
workers' comp market–can't say having the Fund for 95 years has solved
any systemic work comp problems there.

What the Fund has been
though is a doormat for the private market and political
regulators–carriers move into and out of California when workers comp
regulation becomes intolerable for them and back in when the regulatory
climate is tolerable. But the Fund has to stay no matter what and its
revenue and financial stability have varied widely as a result. When
the carriers are interested in being in California, they pretty much
take market share away from the Fund at will.

When the day is
done, it seems to me the authors are arguing they can create something
that looks just like the existing private health plan market—that they
can create something that looks a lot like and is “just as good as
Xerox.”

So?

Looks to me that in an effort to create a level playing field and overcome the objections to a public health plan the authors have succeeded.

But they have also just come full circle and toward what end?

About
half the private health insurance market in the U.S. is in
not-for-profit health plans and networks (Blues, Kaiser, etc.). Just
how would a "modest" public health plan provide something materially
different?

Robert Laszweski has been a fixture in Washington health policy
circles for the better part of three decades. He currently serves as
the president of Health Policy and Strategy Associates of Alexandria,
Virginia. Before forming HPSA in 1992, Robert served as the COO, Group
Markets, for the Liberty Mutual Insurance Company. You can read more of
his thoughtful analysis of healthcare industry trends at The Health
Policy and Marketplace Blog, where this post first appeared.

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lynnwaskiNicoleNateJimBertsch Recent comment authors
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lynnwaski
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lynnwaski

Yes, Jim B. the state’s are just as greedy or moreso. They hire consultants to maximize federal dollars for state-federal healthcare partnerships like Medicaid and use funding to balance their budgets instead of providing healthcare. Not all states are involved or at the same level, but we need to make a change and we need to do it now. If states need financial assistance let’s call it that, not chalk it up to healthcare costs, we can’t afford to do that any longer.

Nicole
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Nicole

Can anyone comment on if this is the current plan that massachusetts has that has been in effect the past 3 years. It sounds like it is… If so was this not enacted when the republicans were in office? Would anyone like to elaborate..

Nate
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Nate

Leave it to the Democrats to take a great idea to reduce health cost, screw it up so it won’t work then try to sell it as a brillant new solution. Republicans have proposed AHPs for 15 years, always to be blocked by Democrats protecting their union bosses. Association Health Plans properly regualated would have drastically reduced cost for small employers and individuals. Democrats were never interested in keeping insurance affordable so they blocked it. Now they want to repackage it and sell it as their own. There are hundreds of successfule examples of METs and MEWAs the only reason… Read more »

JimBertsch
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JimBertsch

I don’t see the value in health care exchanges. I think they are built on the premise that somehow they would be less exploitative than other insurance programs. Personally, I don’t see that as the case. The states are just as greedy as corporations.