The Co-Op Model
August 6, 2009 – 8:43 am by ScottSchoenvogelOne of the solutions being battered about in the news regarding the various health reform proposals is the use of an insurance co-op model vs. a public option insurance plan. A co-op is just a legal structure for a bunch of individuals and families to buy insurance as if they were an employer. At one point, Compass thought this would be a great structure to combine with our consumer support tools and knowledge regarding cost effective plan designs. When we did more research on the model, we found that existing co-ops often struggled because many people joined the group who could not get insurance otherwise. When the claims of those high healthcare users began to impact renewal rates, premiums for the overall group began to go up forcing out members who could get low cost individually rated private insurance. This left the co-op in a downward spiral of costs which is why many of them have failed. The trick is to have a reason why low risk members would want to join the co-op and stay when they have other options. I suspect that any co-op solution would need to have a powerful model with a new level of cost efficiency to create this dynamic.
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