Kent Conrad Admits: Health Care Co-Ops Only Work When The Government Makes Them Work

Senator Kent Conrad has been trying to convince us that government-created health care co-ops are the solution to health care in America. Recently NPR ran an article pointing out that there are already health care co-ops around and that they’re nothing special. Conrad’s office responded attempting to show NPR the error of its ways, but I think the response is illuminating in that it shows just how Conrad expects co-ops to work.
Specifically, that he basically admits they’ll only work if the government mandates a market environment to make them work.

The insurance market reforms included in the underlying bill will do a few things that make it more likely that co-ops will be able to start up: first, the individual mandate requiring all individuals to get insurance means that the risk profile of the market will be changed in a way that will help new firms enter the market. Currently, in the individual market in particular, it would be an incredibly highly risky undertaking for any firm to enter the marketplace, since generally the people who get insurance in the individual market today do so because they are sicker or older (and therefore need insurance). Younger, healthier uninsured individuals generally have stayed out of the market. The individual mandate will bring them in, making the pool less risky.
Second, the bill would ban the use of health status rating and pre-existing condition exclusions — two tools that are actually pretty expensive administratively from an insurers’ perspective. Alleviating firms of the need to hire the expertise and then compete effectively (as is currently the case in today’s market) in selecting out risk will lower the operating costs of potential new entrants. One expert that we have worked with projects that in this new market, co-ops will operate more efficiently than commercial insurers because they will have lower overhead. This means the co-ops’ premiums could be 8-10% lower than other health plans.
Third, the underlying bill would put in place an extensive risk management system in the individual and small group markets, including risk adjustments and reinsurance. These mechanisms will even out the “winners” and “losers” in the marketplace and ensure that co-ops have back-up mechanisms in place in case their brand name (i.e., particularly if any well-known health systems choose to start co-ops up) attracts riskier patients or in case they simply have trouble pricing their premiums accurately.

So first, Conrad would mandate that everyone carry insurance thus requiring the young and healthy to subsidize older Americans who use more health care. Certainly expanding the health insurance risk pool would make insurance more affordable in the short term, but it’s a band aid fix. Because spiraling health care costs aren’t being caused by a risk pool that’s too small, they’re being caused by a lack of market forces in the health care market. We are not individually responsible for our health insurance plans and so we do not exert the sort of choices that create competition and drive prices down. Until we introduce choice into the market place (and government-created co-ops are not choice) we won’t fix that problem.
Second, Conrad would force insurance companies to insure everyone even if that person has a costly pre-existing condition. That’s going to ham-string private insurers who are going to go out of business by being forced to insure people who didn’t bother to get insurance until they got hurt or sick. Which brings us to Conrad’s third point, which is this “extensive risk management system” that will make sure the government-created co-ops have “back-up mechanisms in place.” What Conrad is talking about is bailing out the co-ops once they get stuck with all the people the private insurers can’t cover because they were driven out of business or out of the market by pre-existing conditions mandate.
And to be clear, this herding of people onto co-ops, with the government set to bailout the co-ops at the first sign of trouble, is unstated goal in all of this. What the liberals want is you dependent on government for your health care. They can’t just outright nationalize health care, so they’ll settle for herding you on to health care co-ops that can then be nationalized.