Health Insurance Co-op

Public option is out  . . . maybe. Health insurance co-op is in . . . maybe.

In an effort to buy support for Obamacare, the folks in Obamington are now saying the public will have a chance to buy Obamaplans through a not for profit cooperative.

What could be wrong with that?

Co-ops work well for food and utilities. And not for profit means it has got to be cheaper, right?

The New York Times asks, “What is a health insurance co-op?”

Good question.

But they did get some of the answers wrong.

But one thing that it’s important to get straight from the beginning is the difference between insurance co-ops and health insurance purchasing co-ops. There was a real movement in the 1990s to purchase insurance through co-ops. Those are similar to the exchanges that are being proposed. A few of them got going. They were not remarkably successfully, either. The idea was that consumers bargain with insurance companies to buy insurance.

Notice they said “they were not remarkably successful”.

There are plenty of reasons for that, not the least of which most state regulatory agency’s deemed them illegal. As such, many carriers simply refused to participate.

The few that still exist are nothing more than an endorsement from some quasi-group (such as the Chamber of Commerce) on the promise of a nominal (usually 3%) discount.

What you have in the United States now is concentration of insurance markets. You hear this stuff about 1,300 insurers in the United States and all this competition. But just try to get more than one of them to bid on your contract for a health plan in the Shenandoah, where I am. One insurer controls 87 percent of the market in Harrisonburg, Va.

Think about this for a moment.

I am not going to challenge the 87% market share figure for it may well be right. But how is it one carrier can control 87% of a particular market unless they are offering a competitive product?

There is no question that some carriers, notably Blue Cross, will write business simply because of their brand. But there is no way for them, or any other carrier to dominate a market unless they deliver a competitive product. By virtue of price and value, perceived or otherwise, they preclude any competitors from eroding their base. The only way to unseat a health insurance company that controls 87% of the market is to undercut them on price.

Wal-Mart controls a major portion of retail sales across the country. If someone, say J. C. Penney, decided they wanted to take business away from Wal-Mart they would have to compete on price. I submit that JCP would bite the dust before ever making a dent in WM’s market share.

Same would be true of any carrier who tries to take on big Blue (or any other dominant health insurance carrier).

So the idea that the 87% market share exists because of lack of competition is just plain stupid. But then, it does come from Washington so I repeat myself.

If you had a public plan that could use Medicare rates, the infrastructure would already be there. It could use the Medicare network.

Now this is just plain silly.

Devise a public plan that uses the Medicare rates and Medicare network.

Why come up with a NEW plan? Why not just use Medicare (or Medicaid)?

That’s like those ads for the Toyota Camry where folks say they looked at cars that were “just as good as a Camry” and then it dawned on them. Why buy a knock off when you can get the real thing?

The idea that the public plan will dominate the market, I don’t see that. As the president said, we have a post office, Federal Express and U.P.S. I use all three. The idea [of relying solely on private insurers] is like saying we’ll abolish the post office and give people vouchers to send letters with Federal Express.

I will give them half credit on this one.

Yes, shutting down the Post Office and giving us vouchers to use UPS or FedEx would be silly. But a “public plan” has an advantage no private carrier would have.

The ability to continually operate at a deficit and use taxpayer money in a confiscatory manner means advantage public plan.

Frankly, the idea of a health insurance co-op is just a smoke screen. Truth is, the government really doesn’t care so much about covering the uninsured as they do creating another entitlement program for the masses. If Medicaid and Medicare operated as they should we wouldn’t have a “problem” with the uninsured.

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