Aug 24, 2009

Health Care Co-Ops: A Doomed Idea That Big Insurance Will Love

As opposition to the Public Option of the Healthcare Reform Bill grows, "waffling" Congressmen are floating the idea of establishing a few nonprofit co-operatives to compete with the insurance companies. Such an idea seems doomed to failure and, for that reason, the Big Insurance companies are certain to love it.
The idea that any newly-created, public-backed co-ops can compete with Big Insurance anywhere at any time is frankly ridiculous. It's like suggesting that a small co-op fruitstand will make the market more competitive by opening across the street from a Sam's Club/Wal-Mart mega-complex. It simply won't succeed.
Initially, it's reasonable to assume that Big Insurance would oppose co-ops for the same reasons they oppose the public option. But if co-ops really cannot succeed, and if it shifts the focus away from what they're doing, the Big Insurance carriers will support it hammer and tong. Especially if it become labeled as a negative approach, the carriers are still going to love it.

In the past 20 years, Big Insurance has found a way to turn every seemingly negative approach (e.g. CDH, high-deductible plans, etc.) into profits by diverting employers' attention away from the real causes of skyrocketing health plan costs. The same will hold true of co-ops. And Cigna, Blue Cross, Aetna, United, and others will find a way to support the idea of co-ops as it becomes increasingly evident that they won't work. What's more, they'll pay lots of lip-service because co-ops will divert attention away from their "business-as-usual" efforts to dominate the markets those co-ops are meant to serve.

If such co-ops are formed and try to compete with the Big Boys, it'll play right into the hands of the carriers. When the doomed co-op fails to work in a big market currently dominated by a couple of carriers (like Blue Cross and Aetna in Philadelphia), maybe Cigna will find a way to ride in on a white horse with some cockamamie plan to save the day, or, at very least, split spoils with BC and Aetna. In the end, no matter what the outcome, Big Insurance will still win.

I remember the days in the 1980's when independent staff-model and group HMOs were failing. Carriers waltzed in with PPOs and built their (now indomitable) position by acquiring those HMOs and selling providers on participating in their so-call "less restrictive" networks. The Big Carriers found a way to turn the fear and angst most employers and providers felt toward managed care at that time into a system of healthcare delivery and finance from which few have every been able to escape.

What do they call that psychological condition when hostages fall in love with their abductors? In my 30 years in this business, I've seen medical providers and employers taken hostage by Big Insurance. As suffering, long-term hostages, they're truly scared to death to leave their abductors because the managed care companies have so completely brain-washed them that they cannot live without the Big Insurance business model.

So co-ops will only solidify Big Insurance's strangle-hold of American healthcare. If it's tried, it's bound to fail. And, sadly, all those hostages who glimpsed the co-op approach and held a brief glimmer of hope for freedom from captivity, will have to sink back into hopelessness. Never fear, though, their insurance carriers will reassure them: "Don't worry, things will get better."

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