Co-ops vs. a Public Plan: What's the Difference?

by Peter Suderman

My Reason colleague Ron Bailey looks at Chuck Schumer's ideas for health-care co-ops and finds them essentially indistinguishable from a public plan: "Schumer insists that what he calls 'co-ops' must be national in scope, jump-started with $10 billion in federal government funding, have the power to negotiate payment rates to medical providers nationwide, and be governed by a presidentially-appointed board of directors." Given that the co-op is designed to be a compromise on the public plan, this makes sense. However, it's not clear that a co-op provision would resemble what Schumer wants -- or what it would look like at all, for that matter. 

Still, Bailey writes, if structured properly, co-ops could help make the health-care marketplace more competitive: 

Right now, most states are dominated by one or two insurers. To really get co-ops going, Congress and the administration need to change tax laws to grant nonprofit tax status to mutual health insurance companies just like credit unions enjoy today. Congress also needs to give consumers the same tax breaks for getting insurance from a co-op (or any other private insurer) as they currently get from their employer. But more competition could also be had by the simple expedient of passing legislation allowing insurers licensed to sell policies in one state to offer them to residents of any other state. This would immediately create a competitive nationwide market for individual health insurance policies.