Any Experience with Co Ops ?

ABC

Guru
1000 Post Club
4,096
Anyone have any experience with selling health insurance from a co op?
 
DDG

First how is a CO OP funded? What type of reserves do they have in place for claims funding?

Do they offer options for plan designs similar to for profit carriers?

What does the back end look like. Is this a self funded plan or more like an association?


The reason why I ask is there was about a $1 billion in grant to go out to set up co ops under the health care form law.
 
By co-op I am assuming you mean the ACA mandated Consumer and Oriented Plan. None of these co-ops are operating as of yet. As opposed to some of the current coop's such as Group Health Cooperative of Puget Sound, PacAdvantage, and others.

The inclusion of Coop's in ACA was politically motivated to obtain the yes vote of liberal Democrats. Remember, they were against ACA because there was no public plan option. As such these organizations will take on much more social/liberal (whatever you want to call it) take on how to run a business. More than likely they will not be run as a for-profit plan is run.

Grant/awards monies are now being allocated so that co-ops may be formed to provide coverage for small group and individuals. These must be organized under their state laws as a nonprofit and licensed as an insurer in that state.

Personally I do not believe that many of them will survive much past 5 years or so. To begin with the idea of a cooperative (see pacadvantage) runs counter to Insurance 101. Cherry picking against them will run rampant because it is inherant to a coop model. There will be other competitive issues, such as how to compete with a limited/more costly network, how to implement cost controls, and a host of others.

While I love re-runs of Bob Newhart on ME TV, I have seen this show before and it does not end pretty.
 
Lee,
Thanks for the response!

When I see that kind of money going towards the development of co ops I want to know more.

In my state there are no co op health insurance organizations.
If they end up forming one I want to make sure I am a part of the equation of being able to sell them.
 
Lee,
Thanks for the response!

When I see that kind of money going towards the development of co ops I want to know more.

In my state there are no co op health insurance organizations.
If they end up forming one I want to make sure I am a part of the equation of being able to sell them.

Yes, it's a significant amount of money, reminding me of the money flow in early 70's to help HMO's. My best guess is that the formation/development of Coop's will follow the same route as the HMO Act of 1973.

Money, regulatory assistance, tax relief and other things are/will occur to help the formation/development/implementation of these new organizations. Some will flourish, some will not, but in 25 years, who knows? Some will work with brokers, some will not. But based on the current market forces working against broker commissions, I doubt if very many will work with brokers or make it really worthwhile for them.

That being said, I think there are two opportunities out there for someone like you. The first, and easiest, is to work with a Coop that pops up in your area...and one or more will. Indiana (and the midwest for that matter) has a rich history of cooperatives.

The second option is to create your own, or hook up with someone who is creating their own. I don't mean as a distributor, but as an owner/executive. It is would not be that difficult to create one that will last 15+ years, make some money, and then retire. Just need to make sure you do it the right way.
 
I've been getting more interested in this lately and can add a few thoughts and resources I think are, if not useful, at least interesting.

1. While the terms "awards" and "grants" are used, the funding is in the form of loans. They are of two types: 1) Start-up, which is repayable in 5 years; and, 2) Funding, which is payable over 15 years.

2. The rates on the loans are very competitive. Treasury -1% for Start-Up and Treasury -2% for funding. Cheap money draws interest.

3. Feasability studies are required to be part of the award process. Up to $100k of these expenses can be included in the Start-up laon, but only if the applicant is successful.

4. Reserves and solvency requirements to be funded long-term.

5. With 2 and 3, combined, to me, I believe (and have read) the people with a leg up are larger organizations that have some expertise/experience with existing Cooperative Networks, such as Taft/Hartley Multi-Employer plans, farm and labor co-ops, unions and TPA's.

6. I have no idea if the CO-OP initiative will work but unless ACA gets repealed as a whole, I'm fairly convinced it's going to happen. It strikes me the early winners are the existing large Trade Organizations with a built-in potential membership base as well as TPAs.

7. On a broad basis, I think the organization to follow is NASHCO ... National Alliance of State Health Cooperatives. www.nashco.coop. Interestingly, their 2012 conference is tonight and tomorrow. The agenda, though sparse in details is here:
2012 NASHCO Conference | Agenda | powered by RegOnline

8. Kaiser, Milliman, Mercer, Deloitte, etc... all have pretty good white papers available.

9. How they manage selection, what kind of network deals they can cut, how quickly they can grow membership and how skinny they can get on expenses are the keys, as always.
 
Great Feedback!

My thought is a CO OP is really going to need broker support to build membership. How else will they get off the ground?

Without seasoned insurance professionals there is no way they could be a self sustaining policy base.

If they open shop and only take what comes to them then it will all be bad business.
 
Great Feedback!

My thought is a CO OP is really going to need broker support to build membership. How else will they get off the ground?

Without seasoned insurance professionals there is no way they could be a self sustaining policy base.

If they open shop and only take what comes to them then it will all be bad business.

You are correct to a certain point. The coop actually violates Insurance 101 and Economics 101...but so did the HMO's. Keep in mind that when HMO's started most, if not all, did not use brokers. In fact Kaiser use to wait until an employer called.
 
Back
Top