Tuesday, August 18, 2009

Co-ops: Too Big to Fail?

There are certain words I hear and my radar goes off. Especially when the words are used in conjunction with other seemingly altruistic sounding words and involve large groups of people who do things such as grocery shop with net bags or just tell others to grocery shop with net bags. Peace, any group of people united in peace, international anything, unity and co-op come to mind. As a result when I heard the Democrats shift gears from the public option my fist impulse was a groan and a "now what are they up to" moment.

Ofcourse, co-op is just different packaging for the same package. A baby step in the general direction of a single payer system. Though, I am still hoping the entire bill is scrapped and looms as a huge political capital squandering 600 pound gorilla on the back of Obama. Co-ops would have to be successful in order to take this to the next level or would they? We have healthcare co-ops in this country already. GroupHealth, a Washington state co-op, comes to mind. I do not know that any of them have been very successful at controlling costs and GroupHealth has had problems with premiums steadily rising in recent years.

Initially, co-ops will be small, regionally based nonprofits that will be open only to people with incomes up to certain levels or for people who are not offered insurance by their employers. They won't take business away from private insurers because, by design, insurance company customers won't be allowed to switch to them. Even if people had a choice, they would not be likely to pick the co-ops because they won't have the coverage that the large insurers do.

Co-ops will likely turn into insurance ghettos. Though initially funded by the federal government they will be required to be self sustaining. Good luck finding the insurers to participate. Finding participants will be dependent upon finding enough people who make a certain low income level, are willing to pay the premiums and do the leg work required to join. Contrary to popular opinion, many of the millions on uninsured remain uninsured because they do not want to pay premiums. They want you, the guy with the Porsche or the big house, to pay their premiums.

As with most things the devil is in the details. Without members, co-ops die. With the Federal government involved, they'll never be allowed to die. They will be deemed too big to fail and we know what happens to industries and companies too big to fail.

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