Health Insurance Articles

Health Cooperatives As An Option For Health Insurance

2010-07-23

Health cooperatives are a relatively new, but increasingly expanding, alternative to traditional health insurance coverage. As part of the recent health insurance reform law, officially known as the Patient Protection and Affordable Care Act of 2010, creation of health cooperatives will be encouraged as one way of providing affordable health insurance coverage to individuals, small businesses and other groups that often have difficulty finding such insurance.

Unlike traditional insurance companies, health cooperatives are member-owned. One common type of health cooperative is the patient-member model. With these types of cooperatives, a group of patients owns the cooperative jointly and uses its combined resources to purchase group insurance at a discounted rate. The cooperative essentially brings the benefits of group purchasing power to its members, who could not negotiate such favorable rates on their own.

Another type of health cooperative is the professional group model. Under this model, the cooperative is typically owned by a group of physicians, a hospital, or even a network of providers. The cooperative then leverages its purchasing power to offer affordable group insurance to its patients.

A third type is the employer model. Here, an employer, usually a larger company, establishes and owns the cooperative as an alternative for providing health insurance coverage to its employees. As with the other types of health cooperatives, the employer uses its group purchasing power to negotiate affordable rates.

Most cooperatives operate as non-profit entities. Because profit is not a motive for the cooperative, it can use all of its revenue to provide medical care to the cooperative's members or consumers. Additionally, cooperatives run on democratic principles, with members exercising voting rights on all matters affecting the cooperative's operation. Voting rights may be assigned equally among all members or in accordance to each member's ownership share.

Even though health cooperatives are relatively new in the United States, the cooperative model has been used for a long time in other enterprises. Some apartment buildings have been operated as cooperatives for many years, with each unit owner acting as a voting member of the cooperative. Credit unions have flourished for decades based on cooperative principles, where every account holder is a member of the union. Even some mutual insurance companies have certain aspects of a cooperative business.

As explained above, the main advantages of health cooperatives, as with cooperatives in general, are the ability to use nearly all of their resources for the provision of services to their members and the group purchasing power that the individual members would not have on their own. As the cost of traditional health insurance coverage continues to skyrocket, health cooperatives are often a less expensive alternative for finding affordable care.