Tue Aug 18th, 2009 at 12:39:54 PM EST
One ought not assume the operating principles of all "cooperative" organizations are identical or to attribute automatically a politically meaningful determination of governance to their memberships. As illustrated by the screen capture above, the MostChoice "health coop" is an insurance brokerage. Its website facility qualifies individual applications for distribution among "exchange-participating" insurers. MostChoice may or may not require payment of a co-op membership fee at some point of the insurance application process, depending on how the state in which MostChoice resides regulates inducements. MostChoice may or may not be a nonprofit enterprise. Who would know besides state commissioners and MostChoice members, if any, receiving reports of the co-op's financial performance...
Mike operated his own financial planning firm concentrating in the areas of insurance and investments and was a Registered Investment Advisor. At the same time, Mike co-hosted the WCNN radio talk show MoneyTime in Atlanta until 2000 when the station changed formats. Mike was one of the first Internet entrepreneurs to obtain life and health insurance licenses in all 50 states. He wrote the initial business plan that ultimately led to recruiting Martin and the founding of MostChoice.
...in which they hold no interest anyway since MostChoice is evidently not the insurer writing the policy purchased. It's funny. This firm's arms-length exposure to the value proposition weakly articulated by Mr Conrad captures perfectly the toga party's determination to quash demand for single-payer financing AND industry reform.
A White House spokeswoman reminds us, fulfilment of a promise to reform the health insurance industry does not include field-leveling actions like antitrust litigation or collective bargaining power that the "Medicare-like" coverage symbolized for uninsurable citizens. "Nothing has changed," she said. "The president has always said that what is essential is that health-insurance reform must lower costs, ensure that there are affordable options for all Americans and it must increase choice and competition in the health-insurance market."
In that spirit permit me to dissassemble the idea that national insurance "cooperatives" will relieve monopoly conditons across the US. It's been bugging me.
Under a proposal by Sen. Kent Conrad, D-N.D., consumer[sic]-owned nonprofit cooperatives would sell insurance in competition with private industry, not unlike the way electric and agriculture co-ops operate, especially in rural states such as his own.
Utility and ag co-ops operate in thin markets, where investor-owned producers won't go.
Insurance cooperatives operate in the US. (The fragmentation of Blue Cross and Blue Shield Associations 'cooperative principles is a cautionary tale.) Typically, historically, these organizations don't identify themselves as "cooperatives" by name. Like any cooperative, an insurance cooperative is owned by its customers or membership. "Mutual" something and "society" of somebodies is the customary nomenclature of association --"persons united voluntarily" to meet their common economic, social, or cultural needs-- which must never be explicitly, primarily, and ironically, self-insurance.
In general, each of the 50 states' insurance regulations and commissioners recognize two defined groups. There are "natural groups," people who form a group for purposes unrelated to writing insurance for themselves. That is either an employer-sponsored ("employees") or an association-sponsored group. Then there are people that are not members of either who statutes classify mournfully, individuals (noted here by scare quotes, the "unnatural" group).
A state may issue a license to ("admit") a group of employers or individuals if the establishment of their association predates by a certain period of time application to write insurance. The number of years and documentary requirements of the group's activities varies state to state. The key construct of a group is common activity of its members.
NASRO (left) for example has elevated the pre-Affordable-Choice-Reform era of "exchange-participating" membership to an art form. This cooperative is no insurer. It is an insurance brokerage.
Eventually, Mr Conrad acknowledged his slip. He waved a georgist plume.
"It's not government-run and government-controlled," he said. "It's membership-run and membership-controlled. But it does provide a nonprofit competitor for the for-profit insurance companies, and that's why it has appeal on both sides."
An association-sponsored group of individuals is the category of insurer most frequently characterized as a member-owned organization. Of course, an association-sponsored group of employers is rarely characterized as a "cooperative." Individual incorporated and unincorporated entities constitute a group better known as a trade association. And "Lloyd's associations" --commonly related to "pooling and combinations," here specifically insurers-- are prohibited in the US, excepting certain property protection.
A trade association most certainly marshals collective bargaing power to secure favorable terms from the market for its employer members. By contrast, unrelated individuals submit assembly and sorting by brokers into experience-rated groups "associated" with community-rated plans "competitively" priced by various familiar insurers could be characterized as a "consumer-owned nonprofit cooperative." After all, the agent is an automaton and the individual owns the insurance, right?
Fed VC Making a Market for Third Party Administrator Services
Mr Conrad's appeal to cooperative ventures is more than a little disingenous.
Natural groups that write insurance on their own members are a union, a professional or school association, a fraternal benefit society. Members vote to adopt a medical benefit plan design --for example, comprehensive (HMO, preferred provider, point-of-service), major medical or supplemental -- and capital strategy to finance its operations, for example, establishment of (1) a mutual (or participating) company, (2) a multiple-employer trust, (3) a multiple-employer welfare arrangement.
I estimate this sector comprises less than 5 percent of privately insureds in any one state, and less than 2 percent of wholey privately insureds, that is subscribers under age 65. On average Medicare and Medicaid combined cover 20% of any state's, say North Dakota's, insureds.
With $3 billion to $4 billion in initial support from the government, the co-ops would operate under a national structure with state affiliates, but independent of the government. They would be required to maintain the type of financial reserves that private companies are required to keep in case of unexpectedly high claims.
Not unlike the Congress' partnership with the FRB, states' legislatures determine minimum loss reserves of admitted insurers, and commissioners periodically examine their books to certify compliance. Endorsing FRB regulatory competencies is strange enough. Installing federal "cooperative" agents ("affiliates") in each state would obviate CMMS administration --since "universal health care" displaces some obscene number of Medicaid enrollees-- while formalizing interstate cash flows of "exchange-participating" health plan brokers. In this way, affiliates will facilitate the plan-matching capacities of "co-ops" like MostChoice and NASRO.
NYT noted yesterday, 17 Aug, that Centers for Medicare and Medicaid Services (CMMS) is "the largest buyer of health care in the United States." It is the bureau that administrates benefits schedules and reimbursements. Oddly, enough the Obama administration has not appointed a director. Dr. Denis A. Cortese, president of the Mayo Clinic, is reported to have said, "The vacancy stands out like a sore thumb." Which reveals more about his grip on reality than the economics of public policy rolling down the Hill.
"I think there will be a competitor to private insurers," [DHHS Secretary Katherine] Sebelius said. "That's really the essential part, is you don't turn over the whole new marketplace to private insurance companies and trust them to do the right thing."...
If nothing else, Ms Sebelius understands that incumbents need federal guidance in sorting the "whole new marketplace" of individuals. Compared to employer-sponsored groups, whether whining from the pubic or private sector, the unnatural group is extremely fragmented.
Health Care for America Now.org released a market analysis titled "Pennsylvania Health-Plan Premiums Soar as Insurers Face Less Competition," in May, 2009. The entire report is only 13 pages. The table (right) describes concisely current health insurance industry conditions. One or two firms dominate the market in each state; in aggregate, the same firms dominate private sector underwriting, horizontally integrated complementary medical services (or "network"), and premium pricing, though not necessarily plan distribution or public policy. (For a brief of US antitrust policy, see Rubinfeld pdf)
Comparisons to GDP are a dime a dozen. Compiling the share data was no mean feat, as no federal agency of which I'm aware publishes a dataset for public consumption. That is number of insureds by insurer. Each of the 50 states' commissioners collects the information. So the researchers need to contact 50 different commissions to locate the most recent data. No wonder they were short 7 at the deadline.
- Utility and ag co-ops operate in thin markets, where investor-owned producers won't.
- "High risk pools" or "unnatural" groups are thin markets.
- Fed VC making a market for third party administrator services
- A "cooperative" is any designated third party producer of "Essential Benefit" plans in thin markets.
Community rating means a rating methodology by which the premium for all persons covered by the policy or contract is the same based on the experience of the entire pool covered by that policy or contract form. Experience rating means a rating methodology in which age, sex, health status, occupation or other criteria are applied to the group covered by the policy or contract.