Health Cooperatives Are Not the Answer

The media and government policymakers are abuzz over the possibility of health cooperatives replacing the public option in the current health care reform debate. Earlier this month Hudson Institute convened perhaps one of the only public forums to discuss the pros and cons of such a proposal. Left and right agreed that health cooperatives are not the answer for health care reform.

Even the neutral Congressional Budget Office, in their recent score of the Baucus health proposal, agrees: “The proposed cooperatives had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.”

The biggest problems with cooperatives relate to structure. According to Robert Rosenberg -- former CEO of the first health cooperative in Washington, D.C., Group Health Association (GHA) --  reasons for his organization’s failure included internal problems such as naïve management, inability to secure investment capital from banks, the entrenchment of unions, and the costs imposed by a high option model. In addition, external forces such as the onset of competition in the 1980s from large national groups such as Kaiser Permanente, constraints of the structure of health care, and lack of competitive edge to control hospital costs also helped doom the GHA. While health cooperatives can be successful -- as evident from health cooperatives in Washington State, Idaho, Minnesota, and Wisconsin -- they aren't a promising model upon which to build a national network for improving access to health care throughout the United States.