Health Care Insurance Cooperatives

On the subject of regional cooperatives to compete in health care insurance exchanges under the pending legislation, an analogy to credit unions was made by cooperatives expert Dr. Ann Hoyt of University of Wisconsin. If the analogy has a sound basis it is an interesting framework for considering a new type of health insurer in the marketplace (New Model for the Insurance Industry).

After the savings and loan collapse, and even before, credit unions filled a gap in the marketplace for consumers since they were more responsive to consumer needs than large banks, which were mainly focused on business customers. Credit unions made money by making auto loans and other types of household loans for consumers, and through their attractive loans kept pricing low for auto loans in particular. I personally had at least three auto loans in this manner and the service was excellent.

Similarly, the health care insurance cooperatives could play a role to drive down pricing for health insurance and focus on consumer oriented issues such as incentives for wellness and management programs for long term chronic disease. These cooperatives would be jump started by investment of federal dollars, but independent of federal control. It has been suggested that the Medicare Advantage model of regional coverage could be one alternative to make them also independent of state government control.

Alternatively, the deregulation of interstate sales of insurance could play into the design of these entities as well. But, the main point is that the current health insurance industry is neither profitable nor responsive to consumers, the worst of both worlds, and must change (Restructure or Die). New business models pioneered by these cooperatives could accelerate the needed change and establish new value networks in the health care industry.