Argument: Co-ops cannot scale to compete with insurers like public plan
Gov. Howard Dean told the Huffington Post in July of 2009: "This is a big mistake. These co-ops will be very weak. Many won't have the half-million members that most experts think is necessary to influence the market... Insurance companies will be licking their lips."
Senator John Rockefeller. Democrat from West Virginia: "Are cooperatives going to be effective in taking on these gigantic insurance companies? The answer is a flat no."
Paul Krugman. "Obama’s Trust Problem" New York Times. August 20, 2009: "And let’s be clear: the supposed alternative, nonprofit co-ops, is a sham. That’s not just my opinion; it’s what the market says: stocks of health insurance companies soared on news that the Gang of Six senators trying to negotiate a bipartisan approach to health reform were dropping the public plan. Clearly, investors believe that co-ops would offer little real competition to private insurers."
Sanjay Gupta said on Anderson Cooper 360 in August of 2009: "looking at a lot of these historical knowledge of co-ops, unless you get scale -- hundreds of thousands of people participating -- it is hard for a co-op to compete against a private insurance company, which is why the people who are such supporters of the public option are crying foul. They are saying, look, the public option was a national option, it had scale. Hundreds of thousands if not more people. That could compete. Could a co-op even at a regional level compete? It all depends who joins."
Rick Moran. "Health Insurance Co-ops Too Much Like the Public Option". American Issues Project. August 18, 2009: "the scale being contemplated for their adoption is so great that it is doubtful that health insurance cooperatives could ever deliver what they promise as far as lower premiums and better quality of care."
David Greising. "Give health-care co-ops a chance to work -- some already do". Chicago Tribune. August 1, 2009: "David Knott, leader of the global health practice at consultancy Booz & Co., has studied co-ops and sees no major role for them in health-care reform. 'They're like bringing a knife to a gun fight,' he said.
Co-ops, Knott said, are unlikely to have the wherewithal to compete against big-bucks insurers or negotiate low-cost contracts with hospitals and doctors. They likely could not afford computer systems for electronic billing, or the complex technology that helps direct the cost-efficient delivery of doctors' services, he said.
Co-ops would be unlikely, too, to attract enough members to negotiate prices that would be lower than those obtained by health-insurance giants, which use their market power to beat down prices from doctors and hospitals."
Wendell Potter. "Co-op Kool-Aid is Bad for Your Health". Center for Media and Democracy. August 21, 2009: "If you don’t believe anything else I have said or written, please believe this: nonprofit co-operatives don’t stand a snowball’s chance of competing with those big companies and making a whit of a difference in the lives of the 75 million Americans who either have no insurance or have such marginal insurance they might as well have no insurance.
[...] The reality is there has been a tremendous consolidation in the health insurance industry over the past 15 years. A cartel of very large for-profit insurance companies now dominates the industry. One out of every three Americans is enrolled in some kind of plan offered by just seven of those large companies. Almost all metropolitan areas in the country—and states that are more rural than urban— are now dominated by just two or three insurers. It is impossible for even one of the other large insurers to break into a market dominated by its competitors.
Take Philadelphia, where I live and where CIGNA, my former employer is based, as an example. The lion’s share of the insurance market in Philly is controlled by Independence Blue Cross and Aetna. CIGNA would love to be a big player in its own hometown but has never been able to scale up to be a serious competitor. It has some business there but not much compared to Independence and Aetna. If CIGNA can’t overcome the huge barriers to entering that market, a nonprofit co-op wouldn’t have a chance."