Health Care Co-op Plan Raises More Questions

Published October 12, 2009

Facing criticisms of its proposed public option plan, the White House announced in mid-August President Barack Obama is open to a government-chartered cooperative approach.

Pearl Hahn, a policy analyst with the Grassroot Institute in Hawaii, cautions such a plan could crowd out private plans.

“Unlike a true co-op, which is controlled by its members, such a co-op would be funded by the federal government and run by the Secretary of Health and Human Services,” Hahn said. “A co-op would be especially dangerous to private plans if it offers a wide range of benefits and artificially low premiums, in which case more citizens would be crowded out of their existing insurance plan.”

Chartered Co-ops

Under a plan supported in the U.S. Senate by Sens. Max Baucus (D-MT) and Kent Conrad (D-ND), the federal government would set up chartered co-ops in states. But unlike rural electrical or food co-ops, which are owned by users and workers, the federal government would own these co-ops for several years before turning over some control to patients.

John LaPlante, editor of, says these co-ops would have “several problematic features.”

“First, they would enjoy the implicit backing of the federal treasury,” LaPlante said. That support “would be a permanent, built-in advantage for federal co-ops.”

In addition, LaPlante noted, “There are some governance issues. Since they would be either direct or indirect creations of the federal government, would states be able to regulate them to the same extent that they regulate commercial insurers?”

Public Option, Different Name

Sally Pipes, president of the Pacific Research Institute in California, says there really isn’t much difference between the public option and the co-op approach. Details of both plans remain unclear, but Pipes believes the co-ops plan has several of the same problems as the less-pleasantly named public option.

“The government will place new regulations on insurers, including not allowing companies to ‘discriminate against’ patients based on a preexisting condition or their medical history,” Pipes said. “As a result, the cost of insurance will increase, not decrease. I think the government’s plan will be priced cheaper than private insurance. Ultimately, private insurance will be crowded out, and all of us will be in the public option.”

In the end, Pipes says, co-op health care will be rationed and U.S. citizens will face waiting lists as long as those in Canada and other nations where the government is the primary insurer.

“Ultimately, federally initiated co-ops would bring at least as many problems … as they would solve,” LaPlante agreed.

Sarah McIntosh ([email protected]) teaches constitutional law and American politics at Wichita State University in Kansas.