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Idea of Co-Ops Gain Favor in Health Overhaul

By Jane Norman, CQ HealthBeat Associate Editor

June 17, 2009 -- The idea of including non-profit cooperatives in a health overhaul bill appears to be gaining favor among lawmakers as they try to find ways to promote greater competition in the insurance market. Both President Obama and House Minority Leader John Boehner, R-Ohio, also have spoken favorably about cooperatives in recent days.

The biggest advocate for the cooperatives is Democratic Sen. Kent Conrad of North Dakota, a Senate Finance Committee member, who proposed last week that publicly owned cooperatives could be more acceptable to some senators than a government-controlled public plan option that's opposed by most Republicans and some Democrats. Some liberals might be getting on board, too.

Sen. Tom Harkin, D-Iowa, a member of the Senate Health, Education, Labor and Pensions Committee, said Wednesday he has been working with Conrad on how such cooperatives could be structured. "I'm intrigued by it," said Harkin, one of the most liberal members of the Senate and a strong supporter of the public plan option. "We're just seeing how it might work."

Consumer health cooperatives, as envisioned by Conrad, would operate at the state or regional level and offer health insurance to their members. They would be governed by boards made up of members and would have to meet the same rules and regulations as private health plans in the insurance exchanges.

He said that the country could be divided up into different cooperative regions, with 500,000 to 1 million consumers in each. The co-ops would operate with their own boards, but under parameters set by the government. "It might be a way of having a public plan that is really consumer driven by these co-ops," Harkin said.

Senate Majority Leader Harry Reid, D-Nev., told reporters on Tuesday he wants a public option in the plan because he believes "our country is being run by the insurance industry" and that more competition is needed. But he also said that he recently had a "very important" conversation with Democratic Sen. Jack Reed in which Reed said that health insurance cooperatives have worked in his home state of Rhode Island and in other states. Reed is a member of the HELP Committee and wants to push the idea there, said Reid.

"I do not know if that satisfies all my desires," added Reid. "It's not really a government plan, but I'm not sure that government has to be involved in making insurance companies honest. If these cooperatives can do it, I would be satisfied with that. But that's—that is a page that hasn't been turned yet, but I was very, very impressed with my conversation with Jack Reed last week."

The top Republican on Finance, Sen. Charles E. Grassley of Iowa, said on Wednesday that committee members continue to discuss "maybe encouraging some cooperatives moving into health insurance the same way that maybe 150 years ago county mutuals got together to have fire insurance for farmers because nobody else would insure farmers because they were so far from a fire station, you know, things of that nature."

That would be an opportunity to satisfy supporters of the public option and still get some GOP backing, he said in a conference call with Iowa reporters. "Listen, it's probably not too far removed from Republican philosophy anyway that we ought to have more competition, that it should be risk based, in other words, the option to have the same solvency requirements as the other insurance companies," said Grassley.

He also said Democrats on Finance remain warm to the idea, including the chairman. "I think it's being promoted by Senator Conrad, which is very important to have a Democrat promote an option. And it's getting a favorable look-see (by) a lot of Democrats. Beyond that, well, Senator Baucus would be one that would be looking at it," Grassley said.

Obama on Tuesday said in an interview on CNBC that he supports the public plan option but remains open-minded. "And if, for example, the cooperative idea that Kent Conrad has put forward, if that is a better way to reduce costs and help families and businesses with their health care, I'm more than happy to accept those good ideas," said Obama.

Boehner, on CNN's "The Situation Room," said that "it's worth exploring" whether co-ops might be a solution. He added, "I haven't seen how this would work and what the rules would be, but clearly it's an idea that might be able to bridge the differences. But at the end of the day, we want to make sure that doctors and patients are making decisions about what care is in their best interest, not some government bureaucrat in between."

Harkin said portability is an issue and people moving from one region to another would have to be allowed to transfer co-ops. Four or five states might band together in a co-op or a big state like California could have several, he said.

Conrad said in an interview on CNN's "American Morning" on Tuesday that there are co-ops around the country run by members including the Associated Press, Ace Hardware and Land O' Lakes. A large health provider called Group Health Cooperative is successful in both urban and rural areas in Washington state, Conrad said. "We have hundreds of cooperatives around the country that are very successful," he said.

According to a draft outline of Conrad's concept, the co-ops would be non-profit, and could exist at state, regional or national levels. The same standards as private plans would apply in terms of regulation. They could partner with Accountable Care Organizations and other health systems that provide integrated services including doctors, physicians and facilities. A national co-op risk management board would be set up to provide actuarial services. The board would provide actuarial and risk management advice and could ensure that co-ops are in compliance with state solvency and capitalization standards, the outline says.

One note of dissent, though, has come from former DNC Chairman Howard Dean. "It doesn't fix the American problem. I think the co-ops are a fine idea but they won't work," Dean, a doctor who's written a book on health care promoting a public plan, said on MSNBC on Monday. "The co-ops are too small to compete with the big private insurance companies. They will kill the co-ops simply by undercutting them and using their financial clout to do it."

Dean called the co-ops idea "a compromise that's designed to deal with problems in the Senate but it doesn't deal with problems in America."

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