Wendell Potter Warns: Co-op Kool-Aid Is Bad for Your Health

MrYuckThis article submitted by Bob Schmetzer, IBEW

by Wendell Potter


I’m beginning to think that the Kool-Aid being served at meetings of the Senate Finance Committee’s soon-to-be infamous Gang of Six is coming from either fantasy land or the health insurance industry.

For those of you who might not be following the sorry machinations of health care reform in the Senate Finance Committee, the Gang of Six is a group of three Democrats and three Republicans hand-picked by Committee Chair Max Baucus, who is one of the three Democrats. The gang meets often, supposedly drafting a bipartisan bill. In reality, if such a bill emerges, it will be a gift to the insurance industry because the gang includes some of the industry’s best friends on Capitol Hill.

Thanks to gang member Kent Conrad, a Democrat from North Dakota, the gang reportedly is giving serious consideration to replacing the good idea of a public insurance option with an idea that is sheer fantasy: a few nonprofit co-operatives that would be expected to compete with the cartel of giant for-profit insurance companies and “win in the marketplace,” to use a favorite term of my former CEO and cartel heavyweight, H. Edward Hanway.

If you don’t believe anything else I have said or written, please believe this: nonprofit co-operatives don’t stand a snowball’s chance of competing with those big companies and making a whit of a difference in the lives of the 75 million Americans who either have no insurance or have such marginal insurance they might as well have no insurance.

Kool-Aid came to mind as I was reading a story in the Wall Street Journal this week about Conrad’s continuing and naive insistence that co-ops could work. I remembered sitting in a meeting of other insurance company executives a few years ago. A leading advocate of the high-deductible plans the industry is trying to force us all into these days (and out of the plans insurance industry pollsters and politicians say we are all happy with and can stay in–if we wish upon a star), grew so exasperated after failing to convince us that these plans would be good for most Americans, he finally said, “Look, you’re just going to have to drink the Kool-Aid.”

It looks as if the Gang of Six is about to offer its co-op Kool-Aid to the other members of the Senate Finance and to tell them to drink up.

The reality is there has been a tremendous consolidation in the health insurance industry over the past 15 years. A cartel of very large for-profit insurance companies now dominates the industry. One out of every three Americans is enrolled in some kind of plan offered by just seven of those large companies. Almost all metropolitan areas in the country—and states that are more rural than urban— are now dominated by just two or three insurers. It is impossible for even one of the other large insurers to break into a market dominated by its competitors.

Take Philadelphia, where I live and where CIGNA, my former employer is based, as an example. The lion’s share of the insurance market in Philly is controlled by Independence Blue Cross and Aetna. CIGNA would love to be a big player in its own hometown but has never been able to scale up to be a serious competitor. It has some business there but not much compared to Independence and Aetna. If CIGNA can’t overcome the huge barriers to entering that market, a nonprofit co-op wouldn’t have a chance.

Advocates of co-ops point out that they work in a few other segments of the economy, and primarily in a few rural parts of the country, such as in the cranberry and raisin businesses.

Growing cranberries and raisins is a heck of a lot different from providing health care coverage to 50 million Americans who don’t have it because they can’t afford the overpriced policies from Big Insurance—or because they can’t buy coverage at any price because of a “pre-existing condition.”

To be sure, health insurers take every opportunity to badmouth co-ops, saying they are a backdoor to socialized medicine. Their criticism is disingenuous. Secretly, they would love to have a bill that creates co-ops that won’t work instead of a single-payer or public option that has proven successful in other western countries.



Wendell Potter is the Senior Fellow on Health Care for the Center for Media and Democracy in Madison, Wisconsin.

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