Us health co-op plan in doubt

US health co-op plan in doubt

By Saskia Scholtes in New York and Edward Luce in Washington

A plan to establish more insurance co-operatives could need start-up capital of tens of billions of dollars, analysts say, presenting a potential stumbling block for the US healthcare reform proposal.

The scheme has been championed by some moderate Democrats as an alternative to proposals for a public option.
t would aim to increase competition among healthcare insurers and help reduce the country’s spiralling healthcare costs through government support for not-for-profit insurance co-operatives, which would be owned by and managed for the benefit of their members.

However, analysts at Smart, a consulting firm, have said the co-ops would require tens of billions of dollars in start-up capital to pay for recruiting members, striking deals with medical providers and setting up administrative systems.

Current co-op proposals include start-up funds of about $6bn (€4.2bn, £3.7bn).

As a result, analysts are uncertain whether such co-ops could realise the kind of ambitious overhaul of the US healthcare system that Barack Obama, US president, has promised

“I’m still sceptical as to whether or not co-operatives would really address the reasons for reform: taming costs through increased competition and expanding coverage for the uninsured,” said Vincent Burke, insurance analyst at Smart.

The cost estimates are likely to fuel growing doubts in Washington about whether the co-ops are a workable bipartisan compromise on healthcare reform.

Many Democrats say the co-ops would be a toothless substitute for the public option, which would possess the economies of scale to reduce overall costs.

Last week, Nancy Pelosi, speaker of the House of Representatives, said the House would only pass healthcare legislation that included a public option.

Meanwhile, the Republican Senate leadership is becoming increasingly hostile to the idea of co-ops, which they see as a thinly disguised version of the public option.

On Sunday, Chuck Schumer, the New York senator, suggested Democrats might have to “go it alone” on healthcare reform, which would improve prospects for retaining a public option.

Mr Burke at Smart said nascent co-operatives could also struggle with a “chicken and egg” dilemma.

They would need to negotiate contracts with healthcare providers to attract members, but the providers might be reluctant to work with co-operatives that lacked critical mass in terms of membership.

Paul Hazen, chief executive of the National Co-operative Business Association, said: “One of the greatest challenges as we see it would be how to organise it to get the size and scale to be competitive.”

The US has some successful examples of healthcare co-ops, notably in Seattle and Minneapolis, but both of these plans have decades-long histories and compete aggressively with private insurers for providers and members.