A story by Sam Stein in today's Huffington Post said a "newly resurfaced" GAO study on co ops had turned up now that co ops were suddenly all the rage. Sam's story took a good look at the GAO report and led me to a Friday story in a health-related blog, The Walker Report: Co-ops, Exchanges, Gateways, and the Need for a Public Plan.
The Walker Report takes a look at a General Accounting Office (GAO) study published in 2000 on health insurance purchasing cooperatives. (The full study can be downloaded at the Walker blog in pdf.)
The study found that:
Despite efforts to negotiate lower premiums, cooperatives have only been able to offer premiums that are comparable to those in the general small group market. The cooperatives we reviewed typically did not obtain overall premium reductions because (1) their market share provided insufficient leverage, (2) they could not produce administrative savings for insurers.
The "purchasing co ops" looked at by the GAO in 2000 may or may not be the types of co ops Senator Conrad is proposing. Conrad has refused any real discussion about the details of his plan because, IMO, he already knows co ops won't work and doesn't want us to find out until he can get the proper spin out there and until it is too late to stop him from offering this bi-partisan (hence completely ineffective) solution.
The GAO studied five co ops that pool together health insurance options for small employers. The co ops were similar to "state-based health insurance exchanges." The GAO studied co ops in California, Texas, Florida, North Carolina, and Connecticut (this info edited to reflect comment below).
The 2009 Walker Report references both the 2000 GAO report and the Massachusetts Plan and the Federal Health Insurance Exchange (what our Congress has). While all of the plans did a fair job at reducing the number of uninsured, all failed to control the spiraling cost of health insurance. According to the Walker Report,
The study makes it clear that collective purchasing co-ops will be useless at reducing premiums or controlling the spiraling cost.
The Walker Report refers to Group Health Cooperative in Washington and HealthPartner, Inc. in Minnesota as co op types that Conrad is pushing in place of a Public Option. The Walker Report indicates that these two co ops are often considered "successful." However,
Even the National Cooperative Business Association admits that competition drove most of the health insurance co-ops out of business or forced them to abandon the co-op structure. While Group Health Cooperative provides a good quality of care, its premiums are still spiraling out of control.
Other findings by the GAO report were that co ops were subject to the whims of private insurance markets, frequently failed to give a good range of options to customers, had no real purchasing power to cut costs, and sometimes offered coverage only in "spotty" geographical areas (less rural). Also among the GAO report findings:
"The cooperatives' potential to reduce overall premiums is limited because (1) they lack sufficient leverage as a result of their limited market share; (2) the cooperatives have not been able to produce administrative cost savings for insurers; or (3) their state laws and regulations already restrict to differing degrees the amount insurers can vary the premiums charged different groups purchasing the same health plan."
Howard Dean was right when he said, "This is a compromise that's designed to deal with problems in the Senate. But it doesn’t deal with problems in America."
Co ops are are step backwards, not a step forward. Nor are co ops anything we can build on because they will either never get off the ground, or they will fail. Once they fail, Americans will hold the Democrats responsible for selling out to the insurance companies and as a Party unable to achieve any real reform.