• Health Reform Update
  • August 21, 2009
  • Law Firm: King & Spalding LLP - Atlanta Office
  • The Obama Administration has signaled that it may be willing to accept state or regional Public Health Cooperatives as an alternative to a Federally-administered plan to compete with private health insurance plans.

    The centerpiece of health reform legislation approved by four of the five committees with direct jurisdiction over health reform each establish a Health Insurance “Exchange” or “Gateway,” whereby businesses and consumers could compare health plan options and purchase health insurance coverage. One such option would be a nonprofit, Federally-administered health plan (frequently referred to as the “public option”) that would compete directly with public health insurance plans. This proposal is strongly opposed by most Republicans and many conservative Democrats.

    However, during a weekend speech in Colorado, President Obama said, “the public option, whether we have it or we don't have it, is not the entirety of health care reform.” Yesterday, Secretary of Health and Human Services Kathleen Sebelius said that the government alternative to private health insurance is "not the essential element" of the administration's health care overhaul.

    According to Senators involved in negotiations on behalf of the Senate Committee on Finance, consumer-owned nonprofit cooperatives would sell insurance in competition with private industry, not unlike the way electric and agriculture co-ops operate, especially in rural states. With $3 billion to $4 billion in initial support from the government, the co-ops would operate under a national structure with state affiliates, but independent of the government. They would be required to maintain the type of financial reserves that private companies are required to keep in case of unexpectedly high claims.

    However, many Democrats have indicated they would not support health reform proposals that do not contain a “public option” to compete with private health insurance plans.

    It remains to be seen if the concept of a Health Insurance Cooperative will evolve as a viable alternative to a “public option” as the health reform debate continues.