I really love Group Health but "What Health Co-ops And Seinfeld Have In Common"

John Edgell (CQ Politics):

North Dakota’s Kent Conrad, the moderate, unassuming Senate Finance Committee member and Budget Committee chairman, is in the spotlight these days.

As Budget chair, his approval is necessary to split health care reform legislation into two and attached to the budget reconciliation process, a process which requires 51 votes instead of the normal 60 total under Senate debate rules. On Sunday, Conrad gave thumbs down to that.

He’s also the point person for ‘public co-ops’ as a means to provide health insurance access to roughly ten million Americans, mostly the working poor. Conrad cites Ocean Spray (cranberries), Ace Hardware (um, hardware) and Land O’Lakes (dairy) as successful models of non-profit cooperatives s, although each is organized as a seller of a commodity and not a purchaser of a service such as health care.

One successful public cooperative in the country is Group Health Cooperative of Puget Sound, the third largest health insurance firm in Washington State; it has a 9 percent market share, with roughly 500,000 enrollees. Another is Health Partners in Minnesota, the state’s second largest carrier, with 657,000 enrollees. That’s pretty much it.

Nevertheless, Conrad’s convinced consumers can do a better job compared to bureaucrats (but of course only with considerable technical assistance from bureaucrats to set up vastly complex networked computer systems, and with $6 billion from taxpayers for market capitalization and administrative overhead).

The idea of a buyers’ cooperative for health care is not new. Indeed, it was the operational centerpiece of the doomed 1993 Clinton health care proposal, labeled health insurance purchasing cooperatives, or HIPCs, and warmly embraced by moderates in Congress and business-backed think tanks. Sixteen years later, congressional moderates are scrambling again to find an alternative which can’t be labeled as a big government solution.

Somewhere, the king of consumer co-ops, Ralph Nader, must be smiling, or at least smirking. Nader’s “Buyer’s Up” co-op for home energy first found footing in the mid-1980’s. (Too bad it quietly went belly-up in 2006.)

Conrad’s proposal would have employees from companies with 10 or fewer workers banding together as a non-profit group to purchase health care coverage from hospitals, doctors, medical device makers and drug firms, thus generating sufficient market power to guarantee lower prices and quality care. That’s simple enough to get heads to nod at the next town meeting.

Conrad first floated his alternative in mid-June, where it was embedded in a leaked copy of a Finance Committee Democrats’ working draft. By the next day it had vanished. Democratic progressives have since made the stability, permanence, portability and simplicity of the ‘public option’ their own Waterloo, and have brought it back to life when it looked dead before.

Sometimes, though, you can be for something simply by knowing who’s against it. Health insurance companies seemingly object to the ‘public co-op’ too. So do Rush Limbaugh, Glenn Beck, and Sean Hannity. All together now, can you say “Washington takeover of health care.”

Moreover, Conrad’s proposal gives political cover — something seen as other than a big government solution — to his moderate-leaning Senate colleagues, such as Ben Nelson of Nebraska, Evan Bayh of Indiana, and Blanche Lincoln and Mark Pryor of Arkansas. Oh, and Finance Chairman Max Baucus too, from red-State Montana, although he proposed a ‘public option’ in a position paper last November but has since assumed a more neutral observer stance as he tries to cobble together a bipartisan bill.

And don’t overlook the 49 House districts, represented largely by conservative “Blue Dog Democrats,” where voters split their ballots in 2008 by choosing Republican John McCain for president while electing a Democrat to represent them in Congress. Ironically, the Blue Dogs further complicated things when they doubled the exemption on small businesses with an annual payroll below $500,000 — twice the original $250,000 amount. Still, despite the political convenience of embracing a public co-op, the Blue Dogs remain open to a public option, perhaps because the bulk of the 47 million uninsured — 30 million Americans, according to the Kaiser Foundation — are the working poor .

Nevertheless, Conrad’s public co-op fails for one simple reason: it can’t work.

Consider how a public co-op would function in Conrad’s North Dakota, which according to a May 2009 study has but one available health insurer, Noridian (operating as the non-profit Blue Cross Blue Shield of North Dakota), which collects nearly 90 percent of the state’s private insurance health care premiums, with 475,000 enrollees.

Every hospital and doctor in North Dakota is allied with Noridian already, usually under exclusive terms, and under a deal cut in the House health measure the American Medical Association secured a change making participation in a public option voluntary. A new, unproven public co-op could never build a viable network of doctors, hospitals, pharmacies, and nursing homes to treat North Dakota residents.

But no worry, since it’s a non-profit, the incoming president of Blue Cross Blue Shield of North Dakota, a nearly pure monopoly, would seek to qualify as the state’s approved public co-op. Now there’s ‘free enterprise’ for you!

No wonder the Oppenheimer investment firm informed its clients that “start-up insurance cooperatives would lack the expertise to price premiums appropriately or manage the cases of members.” The firm concluded that public co-ops in any form would be too small to press doctors and hospitals for lower costs.

In its current form, in practical policy terms Conrad’s public co-op is a ‘Seinfeld' episode – it’s about nothing.

Under the spotlight, it melts. You may as well call it the ice cream option.