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Cooperatives are organizations that are owned and run by those members that enjoy their services. In the United States, nonprofit health insurance cooperatives have been recommended as the third option to the tradition private health insurance and the newly suggested public health insurance. In United States, different cooperatives offer their members diverse services that range from credit loans to electricity. Thus, the issue of cooperatives and specifically the concept of health insurance cooperatives is not a new phenomenon to Americans. The introduction of health insurance cooperatives in US will enable an approximately 47 million uninsured Americans who belong to the low social economic status receive affordable medical care.
Health insurance cooperatives have lately received a considerable political support from various political personnel’s such as the senator Kent Conrad as they are known to reduce the insurance premiums paid by their members considerably. He considers them as the best option to provide insurance covers to Americans since they are neither governmental project nor one for profit making, but instead a project tailed at helping the public. Despite the great support the project has received from various stakeholders, there are few people that view it as a wrong focus that cannot match the superior government program. They are of the opinion that the government should establish health insurance cooperatives as an alternative to the government public health insurances, but not as their substitutes.
They argue that health insurance cooperatives cannot expand robustly as the public health insurance projects can do. This controversy has raised a considerable debate worldwide of whether the United States should opt for a public health insurance program or health insurance cooperatives which are regarded as more economical, efficient and effective in addressing the health issues of majority of Americans who cannot afford to access the high insurance costs associated with private insurance coverage (Debate: Health insurance cooperatives, 2010).
History of Insurance Cooperatives in United States
Health Insurance Cooperatives are health insurances schemes that are designed to offer insurance services to their members at a reduced cost than the private insurance companies. Health insurance cooperatives are jointly owned by all those people that insurer with them, unlike private insurance companies that are owned and controlled by private investors with their main objective of making profits. The concept of health insurance cooperatives is not a new phenomenon in United States since it has existed in United States as early as 1983 in many some of its States such as California and Minnesota.
Such cooperatives are generally known to be formed and managed by employers with a common agenda of enhancing the health care of their employees. For instance, annually Santa Ana Strawberry a farm that is owned by Mack Ramsay Pores offers its 35 employees insurance coverage from a health insurance cooperative based in Irvine. The insurance cooperative covers roughly 15,000 Californians agriculture laborers. Due to its cost effective mechanism, this nonprofit health care system is currently being reviewed as an appropriate model by the proposed insurance cooperative. The Irvine health insurance cooperative is referred as the United Agriculture Benefit Trust and operates like a normal private insurance company.
The reason why it is more profitable to its members than other insurance firms is because it uses its power of collective bargaining to negotiate better rates with doctors and hospitals. Ramsay commends that the services that are received from health insurance cooperatives as being better and cheaper than those provided by their counterpart private insurance companies. The services that the health insurance cooperatives offer are superior to the one given by private insurance companies because cooperatives do not operate for profits and any profit they realize in their operation together with their savings is usually reinvested back.
Nevertheless, there are some critics who argue that health insurance cooperatives are not in the long term profitable to their members since they are noted to be more likely to face insolvency due to being poorly regulated, unlike their compliment private insurance companies that are better managed. The allegation about health insurance cooperatives being faced with insolvency is not true according to California Insurance Commissioner Poizner who advocates that all insurance trust face similar challenges and all could ruin if hit hard financially (Stukel, & Deller, 2009)).
Health insurance cooperatives results when owners of small enterprises join together and negotiate for lower insurance coverage using their multitude as their negotiating power. It is through this process that the California agriculture Trust was initiated in 1983. Cooperatives are successful in ensuring low rates, unlike tradition insurances. The health insurance cooperatives are able to offer their members better rates because their premiums are exempted from being taxed.
Nevertheless, they are thus exempted from guaranty funds that are meant to pay claims in case an insurer becomes insolvent. This is a major failure that is associated with health insurance cooperatives in America since all those cooperatives that have become insolvent were unable to pay their members and thus bringing a dilemma of whether they are really profitable to their members at all (Longley,2009).
Pros and Cons of health insurance cooperatives
Cooperative health insurance programs have a number of merits. One advantage that is associated with them is their ability to strike a good deal with relevant stakeholders due to their collective bargaining power. By aggregating together cooperative members are in a better position to receive insurance coverage at lower costs. The lower costs that are associated with collective bargaining may encourage even those firms that were not previously offering health coverage to their employees being encouraged to do so. In addition, to the lower costs associated with health insurance cooperatives as a result of collective bargaining, the premiums that are paid by cooperative members are also lower because they are not taxed like other premiums paid by the members of for-profit insurance companies.
These exemptions enable cooperatives to offer their employees insurance coverage at more affordable rates since they are not subjected to the same regulations as other private insurance firms. If the United States adapts the proposed health insurance cooperatives, the high number of the uninsured Americans will greatly reduce since many of them will now be in a position to afford the new insurance coverage as it will be more affordable.
Health insurance cooperatives are programs that are designed to cater for the health needs of their stakeholders, but not meant for profit making. Though the venture are required to operate profitably, the profit realized is reinvested back to the system to enhance the services delivered, rather than being channeled away as a bonus to the shareholders as it is common by private insurance companies. Thus, health insurance cooperatives are then more profitable as they are more likely to offer their members more benefits due to the profits and savings they reinvest back to the system instead of distributing them to the shareholders.
Analyst believe that if well supported and managed, health insurance cooperatives can support up to 12 million customers which can make them among the leading nations insurers. Since the project is community based, it uses community networks, infrastructure and resources to offer its services better and at a more affordable price to its consumers who are also its members, unlike private insurance companies that first invest heavily on these facilities and then raise their coverage costs considerably to get back the money they invest and make a profit. Health insurance cooperatives seem to be the best alternative health insurance system for the Americans.
It is believe that given appropriate regulatory system coupled with necessary funding, health insurance cooperatives are sustainable and will be very effective in providing American with health services that are exemplified internationally. To enhance their efficiency, it is recommended that establishment of a national body that will oversee negotiation of the reimbursement rates will be very important. The health insurance cooperatives to be established should be tailed to be patient-centered, performance oriented for providers and one that helps to control and keep costs low so that many Americans can enjoy its services (Wicks, 2002).
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Private insurance companies have dominated very much the American market. Their dominances have resulted to them offering insurance coverage at very high costs a move that has rendered many Americans without insurance covers. The current government is now very concerned about how it can increase the number of Americans that are insured and if possible ensure affordable coverage for all Americans. Thus, the introduction of health insurance cooperative will be a very strategic move for it.
This is because health insurance cooperatives will create a stiff competition to the existing firms because cooperatives will be able to offer their coverage at a lower cost to their members due to the exemptions they enjoy. This competition will intern make other firms that offer insurance covers to lower down their coverage costs in order not to be phased out of market. Fair coverage will help more Americans take insurance covers and help them reduce the risks they expose themselves to without the covers (Hennigan, & Linthicum, 2009).
Despite the many advantages that are associated with health insurance cooperatives, they are also faced with a number of limitations. For instance, health insurance cooperatives are known to suffer from the challenge of scaring. To reduce the large number of uninsured people in United States, the system will require a considerable time and billions of dollars being invested to oversee its success. The biggest challenge is on how to build up a system that will overwhelm the current insurance system owing in mind that the current health insurance cooperatives in US accounts for only 1 percent of the existing health insurance market. Analysts predicts that with the current environment, these cooperatives will not be able to win any market in many areas due to the stiff competitions they are likely to experience from the established private insurance firms.
As mentioned earlier, health insurance cooperatives have a problem in scaring and thus, addressing the need of 47 million of the American who are not insured will be a major challenge to them. Therefore they have to be strategically positioned to be successful in realizing their main objective of insuring the millions of Americans that are not insured. In addition, if they fail they will not even succeed to offer better packages to Americans who are already insured with other companies, but cannot afford certain packages from their current insurance companies. These analysts are advocating for the program to receive unfair market edge through specific government interventions. They recommend that the members of health insurance programs should not be subjected to pay premium taxes that are associated with for- profit insurers. Thus, the system is to be greatly supported by taxpayers’ money which will give it the required advantage to compete healthy and greatly boost help it in spreading (Richardson, 2011).
Health insurance cooperatives are known to suffer from the problem of portability. Its problem in portability may act as a very big slow down in the expansion of the new insurance scheme, since many Americans will hesitate to embrace it as they will not be aware of what will happen when they relocate to new States. The problem will occur because a member of a certain health insurance cooperative will be forced to buy coverage of another cooperative when he relocates into another state since it will be very difficult to guarantee equivalent insurance coverage. This problem occurs since cooperatives are not well spread and one may not be in a position to take one plan from one Estate to the other. Due to their portability failure, health insurance cooperatives will be considered as inferior to their counterpart private insurance companies. Thus, lack of flexibility in portability is likely to greatly compromise their spread which might render them unprofitable in the long run (Richard, 2010).
The histories of many health insurance cooperatives have revealed that most of them have failed due to their inability to compete effectively with other insurance companies. Moreover, they are also known to have failed as a result of building of tension between the doctors and consumer-oriented governing boards that are known to compromise their compensation of physicians very much. This compromise results to reduced performance and quality among the physicians. This makes doctors to be discontented and less motivated which greatly compromises their services. Thus, with this major shortcoming health insurance cooperatives may not seems to be the best insurance alternative to have since they are more likely not be effective and hence not profitable eventually to invest in (Nakhasi,. & Thigpen, 2009).
My views concerning Health insurance cooperatives
Health insurance cooperatives are well known to cut down the costs involved in health insurance coverage. The reduced costs are necessitated by their collective ability to bargain for low coverage costs. In addition, their exemption from paying taxes on their premiums makes them be able to offer their customers covers at a lower cost. Despite the critics that they are not portable and not well established, the American government should go ahead and take health insurance cooperatives as their alternative option to private insurance. This is because health insurance cooperatives will greatly reduce the number of Americans who are not insured considerably since their premiums are lower and thus will be affordable by many Americans.
The existence of an alternative insurance system in America and especially health insurance cooperatives will be a very strategic step for the government to introduce an insurance competitor to help and regulate the pricing of insurance coverage that is currently highly infatuated. The new program will initially encounter some challenges as highlighted by its limits mentioned above, but with proper funding and support from the government it will eventually succeed and be the solution the Americans are looking for (Melbourne, Australia Discussion Paper No 3, 1997).
The establishment of health insurance cooperative in America will encompass in acting of a policy that will exempt members of health insurance cooperative from paying taxes on their premiums. In addition, for successful operations of the health insurance cooperatives, they have to file with appropriate departments of insurance, although they will be required to offer lower capital requirements than the other insurance companies. According to the US president Barrack Obama, the enactment of health insurance cooperative as an alternative insurance system in America will result to an increase in the cost of private insurance such that only very few people will afford it. Nevertheless, the new insurance will greatly help many Americans that are not insured get an opportunity to get coverage. The new insurance will be offered at a cheaper rate and thus more affordable than the current one. Many people that have insured with the private companies will be forced to take covers with health insurances cooperatives since they will be more affordable than the former (Torrey,, 2010).
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