Appearing Sunday on CNN’s “State of the Union,” Sec. of Health and Human Services Kathleen Sebelius suggested that the Obama administration might be willing to consider nonprofit insurance cooperatives as an alternative to its controversial government-run public insurance plan. Nonprofit cooperatives are far from a new idea. In fact, you may already belong to one.
According to the International Co-operative Alliance, a “cooperative” is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise.
Nonprofit cooperatives have been around for years. If you, like millions of Americans, belong to a credit union or get your electricity from Rural Electric Association, you belong to a cooperative. Banking, utilities and agricultural cooperatives are widespread and growing.
From the health insurance perspective, health insurance cooperatives are already operating in several states where they strive to secure affordable group insurance for small business owners, writers, farmers and many other small employers.
Pros of Health Insurance Cooperatives: Because of their nonprofit status, health insurance cooperatives enjoy tax savings they can pass along to their members in the form of reduced premiums, co-pays, prescriptions and other health care costs. In addition, cooperatives typically represent a large number of members, thus giving them extra bargaining power when negotiating with the insurance companies.
Cons of Health Insurance Cooperatives: Even as their nonprofit status gives insurance cooperatives tax advantages, it burdens them with financial disadvantages. Nonprofit organizations that get into financial trouble – which many do in bad economic times – have far fewer options for recovery than regular for-profit companies, potentially leaving their members at risk of losing their insruance. In addition, some states do not apply the same consumer protection regulations to cooperative insurance associations as they do to private insurance companies.