Conservatives believe the health insurance bill, as it currently exists in the House, is a thinly veiled attempt to undermine private insurance and move toward a government single-payer monopoly. It's hard to disagree. It's the type of incrementalist Fabianism I've come to expect from Obama.
So what do co-ops do for this?
I can envision two models for Health Co-ops:
- Relatively small, perhaps regional or local independent co-ops that operate and are regulated just as normal insurance companies are regulated. The analogy would be what credit unions are to for-profit banking institutions, or agricultural co-ops.
- Relatively large, monolithic Government-Sponsored Enterprises closely tied to public policy objectives of the federal government. Think Fannie Mae/Freddie Mac, or the Post Office. "Fannie Med".
When Republicans say they're open to the idea of co-ops, they're probably talking about the former. When Democratic pols assure their supporters that co-ops are the same or equivalent to the "public option", I have to think they're referring to the latter.
A government plan would have several distinct unfair advantages over private insurance: It would not pay taxes; it would wield outsized power to "negotiate" (fix) prices, driving providers to increasingly pressure the private market for profit; and it would be able to hide behind the same kinds of government accounting that have provided us with the demographic time bombs in Medicare and Social Security.
Type-1 co-ops have only the first advantage, but, judging from the credit union analogy, would not meaningfully undercut private insurance. Whether this type of co-op solves many problems is unclear, but at least it would remove the much-maligned profit motive from the equation. More of a co-op's revenues would likely be used for actual health care rather than marketing, and premiums might be marginally lower than for private insurance. It would represent "competition" in a much truer sense than Type-2 co-ops or a government plan.
Type-2 co-ops would have all three problems, and would essentially be the equivalent to a government plan. Moreover, it would be more subject to political influence from Washington.
Of course, even if we get a workable co-op framework there's still a lot to dislike about the House bill.