Health Insurance Cooperatives: A Real Reform Alternative?

Author:

Jordan Battani

The recent appeal of the cooperative business model for U.S. health care reformers rests on the assumption that member ownership will remove the incentive and requirement to generate excess profits for distribution to investors and shareholders. The historical role of cooperatives in banking, utilities and some insurance sectors, as a mechanism for enabling small purchasers to compete effectively with larger businesses, has seemed like a natural fit for addressing the market limitations of the current health insurance market.

The Affordable Care Act provides a working definition for “consumer oriented and operated plans” (CO-OPs) and earmarks funds for grants and loans to underwrite the start-up and initial capital requirements for these new organizations. Newly forming CO-OPs face significant barriers to entry. Those that succeed will be charting a new business territory with few examples of large-scale successes in the health insurance sector.

This paper examines those challenges through the lens of current market conditions to provide a suggested roadmap for starting, and succeeding, with a health care insurance cooperative.

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