Skip to main content

Advanced Search

Advanced Search

Current Filters

Filter your query

Publication Types



Newsletter Article


National Health Care Co-op Venture Eyes Spring Launch

By John Reichard, CQ HealthBeat Editor

November 16, 2010 -- Who says health care co-ops don't have a shot at tripping up the goliaths of the national health insurance market?

Not John Jemison, a Texas entrepreneur who's aiming to launch co-ops nationwide starting next spring by tapping into some of the $6 billion in co-op seed money the Department of Health and Human Services (HHS) will distribute under the health care law (PL 111-148, PL 111-152).

Boosters envision co-ops as a way to put consumers in charge of health plans, not profit-minded insurance executives who they say have incentives to stint on care. But skeptics see little chance that co-ops can make a dent in the insurance market. Why? Because it is dominated by companies whose enormous size gives them leverage to negotiate better deals on everything from doctor and hospital care to information technology.

When co-op provisions were added to health overhaul legislation last year, there was plenty of doubt about who, if anyone, would take on the challenge of competing with the big insurance companies.

Jemison, for one, says he's up for the challenge. A Houston-based insurance agent who says he helped pioneer the business of insuring college and pro athletes against injury, Jemison was among the representatives of an estimated 20 or so organizations interested in offering co-ops who met with HHS officials Tuesday afternoon. The meeting was convened by Sen. Kent Conrad's staff as a "learning session" on co-ops.

Jemison, who complains that the overhaul law is getting a bad rap, has some surprising allies. Roy Ramthun, the top health policy adviser to President George W. Bush, is acting as a consultant to Jemison's venture, which is called the Workers Cooperative National Association.

Ramthun says he's backing the project because it would create more affordable insurance options for small businesses in state insurance markets where there isn't much competition.

"Small businesses employ the majority of America's workers, yet pay up to 30 percent more than large firms for similar health services," Jemison's group says in a description of the project submitted to HHS officials. "Not coincidentally, small businesses are less than half as likely as large employers to offer health benefits to workers," the document adds.

"Small and medium-size companies are one of the most profitable classes of business for insurance companies, and they do not want to give up control of that business to co-ops," the document asserts.

"If this were to occur, their premium and revenues would be drastically reduced. The essential government purpose is for co-ops to create the opportunity for small and medium-size employers and their employees to purchase health insurance on a competitive basis, just as large employers do."

The document includes a request for about $3.5 million in funding from HHS to "immediately" establish a co-op. That amount includes the cost of an evaluation by the Harvard Medical School's health policy department "to ensure rapid dissemination of lessons from the development of co-op models."

The law doesn't require HHS to issue loans and grants for co-ops until July 1, 2013, however. HHS must give priority when it does so to organizations that offer to set up statewide plans.

Section 1322 of the law also requires HHS to give priority to co-ops offering "integrated" models that involve teamwork among different types of providers, that have "significant" private support, and have enough money to establish a co-op plan in each state. Any profits made by the co-ops must be used to lower premiums, improve benefits, or improve the quality of care.

Jemison's group envisions the creation of "multi-specialty medical centers" and a menu of health plans including health savings accounts, which Ramthun strongly advocates. "We're going to have Cadillac and Chevrolet plans," Jemison says. He said he's talking to bankers who are interested in offering financial services, including health savings accounts, to co-op members.

His group aims to start marketing to employers first in California, Texas, and Alabama and then in Florida, Georgia, and Tennessee. The co-ops themselves could be ready by January, 2012, he said. Asked where the money will come from to fund such a large scale venture, Jemison predicted that "several thousand businesses" representing about $2 billion in premium revenues will sign up in the first six states.

But Robert Laszewski, an insurance industry analyst and consultant in suburban Virgina, says the entire co-op provision of the health law is ill-conceived. "I can't tell you how crazy it is to give entrepreneurs money to go up against Wellpoint and United Healthcare," he said. "The place for venture capital is Wall Street, not Washington.

"Which doctors and hospitals are going to sign up and how are your rates going to compare to the big boys?" Laszewski asked. "I'm happy to be convinced. I want to see the provider contract."

But Jemison emerged from the meeting expressing enthusiasm for the venture. "I think it was a very good meeting," he said. "It's obvious that the [HHS] Secretary is looking for a lot of help."

Although HHS isn't required to offer grant and loan money until more than two years from now, Jemison said his message is "let's not wait. Let's go ahead and build a model for everybody." He said Richard Popper, deputy director for insurance programs at HHS, appeared to be interested in the idea.

An HHS spokesman declined to provide a reaction from Popper to the meeting and otherwise declined comment. Conrad's office didn't immediately respond to e-mails requesting comment

Publication Details