By Anika Anand
The thought of health insurance is a huge source of anxiety for New Yorker Cayte Grieve.
After the small business owner realized she would have to pay about $15,000 out of pocket to treat a jaw infection, she considered dental insurance. But after she discovered the monthly premiums would be more expensive long term, she decided to take the financial hit. Now she just pays $100 per month for emergency health insurance, which provides coverage only for emergency room and ambulance care.
“When it comes to buying health insurance, you just have no idea if you’re making the right decision,” Grieve said.
Healthcare costs in the New York-Northern New Jersey area increased 5.2 percent in the past year, the most rapid rise in consumer goods behind the cost of fuel. The rising costs have made health insurance increasingly unaffordable for individuals who have to buy their own. This poses a threat to consumer spending, which is helping drive the nation’s economic recovery.
The president’s health reform bill presents a potential solution: health insurance cooperatives. Of the $3.4 billion the new healthcare law sets aside for co-ops, $174 million in loans was recently given to the Freelancers Health Service Corp., New York’s first health insurance co-op.
As of September 2011, there were 2.9 million New Yorkers without health insurance, a number that has increased much faster in New York than in the U.S. as a whole, according to the Fiscal Policy Institute.
The purpose of health insurance co-ops is to introduce more competition to the market and help drive down premiums.
They differ from larger, corporate insurance companies because they will be nonprofits, which mean any revenue earned will be put back into the co-op. Also, they will be owned and run by an elected board of co-op members, rather than investors.
Because of these two characteristics, consumers are more likely to trust the co-op model versus corporate insurance companies, supporters say.
“We’ve spoken to so many people who feel so lost in the healthcare system just trying to find a doctor they can trust,” said Ann Boger, the chief operating officer of the Freelancers Union—the organization that is sponsoring the new Freelancers Health Service Corp.
Co-ops were more popular back in the early 1900s, and they did quite well until the 1980s, said Peter Kongstvedt, a health policy professor at George Mason University. Then, the market changed, and people decided they wanted access to all the doctors in the market, rather than the ones who had signed up to be part of the co-op. But now the market may be changing again, and people are becoming more interested in having a smaller network of providers who they can trust.
“Because of the terrific cost of inflation, employers and some consumers are having a revived interest in narrow networks,” Kongstvedt said. In a narrow network, the co-op promises specific doctors and hospitals a steady flow of business from its members. So, they are able to negotiate lower prices for medical services.
There’s also another way co-ops can theoretically lower healthcare costs, said Richard Miltenberger, a board member of Montana Health Cooperative, which recently also received a federal loan.
It’s hard for existing insurance companies to turn over a new leaf, but co-ops can start with a blank sheet of paper and aren’t burdened by longstanding contracts with hospitals and doctors, he said. They can pay a doctor more money if he or she spends more time with patients. Or, co-ops can redirect reimbursements toward primary care instead of high level expensive testing, he said.
The Freelancers Union, a 170,000 member nationwide organization, currently offers insurance for only freelancers through its Freelancers Insurance Company. The co-op will offer coverage for all individuals, not just freelancers. The Freelancers Union is supporting the creation of the co-op, but will not actually run it. They also received funding to support health insurance co-ops in New Jersey and Oregon.
The co-ops will begin enrolling members in Fall 2013 and launch on Jan. 1, 2014. The Freelancers Union said in the next seven years, they expect to cover 100,000 New Yorkers.
The coverage plans are still being finalized, Boger said, and they are working closely with financial experts to figure out how the co-op should price its plans to be competitive.
To make their plans competitively priced, they’ll need to attract a significant number of members. But to attract a large pool of consumers, they’ll need to convince people like Grieve that they have her best interests at heart.
After dealing with all the confusion over what health insurance to buy, Grieve said when she hears details about the co-op, her “skeptic brain takes over.” She rattles off a list of questions, including ‘Is the insurance one size fits all?’ and ‘How do I qualify?’
Then she asks the one question that the co-ops need to have a convincing answer to if they’re going to succeed: Is it worth it?
Here’s some of the interesting data we’ve looked at so far. We’ll continue to build out more graphs as more people fill out the survey. So, pass this along to your friends and see how the results change.