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

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.


Thank you, thank you, thank you, Mr. Potter, from the bottom of my American heart. We don't just need a government-run health care option, we need more people like you, who know true things when they see them and act accordingly. I can only hope that in the long term you will look back and know that you didn't just do the right thing, what you did also made you happier, healthier and wiser -- and kept you in better company.

First, Thank you, Mr.Potter, for your views from the inside....at first I was intrigued by the idea of health care co-ops, but after a little more investigation, I realized this was not even a good stop-gap measure. State run co-ops simply would not have the clout of the government in lowering costs. No wonder the insurance companies have embraced them. They offer no threat. Please continue to speak out. You have many miles to go before you truly have redeemed yourself from all the years you supported this current bankrupt system.

States have tried a public option for their healthcare But since it does not cut out all the cost caused by insurers it has not worked out so well. Every country that has National insurence uses a Single payer type plan. A single payer plan for the U S would save $4 trillion in cost over ten years, cut expences per pateint by 50%, Save the States and business untold dollars. I apologize to the congressman but I can not remember his name but he has drafted a single Payer bill, Bill HR676. If you do a search for HR676 you will find the bill along with a few petitions to sign for it. Single Payer is the only option that will save enough in expences by eliminating the middleman ( insurers) that won't bankrupt the country.

Wendell, co-ops certainly are an idea that seems doomed to failure and, for that reason, the Big Insurance companies are certain to love it. The idea that any newly-created, public-backed co-ops can compete with Big Insurance anywhere at any time is frankly ridiculous. It's like suggesting that a small co-op fruitstand will make the market more competitive by opening across the street from a Sam's Club/Wal-Mart mega-complex. It simply won't succeed. Initially, it's reasonable to assume that Big Insurance would oppose co-ops for the same reasons they oppose the public option. But if co-ops really cannot succeed, and if it shifts the focus away from what they're doing, the Big Insurance carriers will support it hammer and tong. Especially if it become labeled as a negative approach, the carriers are still going to love it. In the past 20 years, Big Insurance has found a way to turn every seemingly negative approach (e.g. CDH, high-deductible plans, etc.) into profits by diverting employers' attention away from the real causes of skyrocketing health plan costs. The same will hold true of co-ops. And Cigna, Blue Cross, Aetna, United, and others will find a way to support the idea of co-ops as it becomes increasingly evident that they won't work. What's more, they'll pay lots of lip-service because co-ops will divert attention away from their "business-as-usual" efforts to dominate the markets those co-ops are meant to serve. If such co-ops are formed and try to compete with the Big Boys, it'll play right into the hands of the carriers. When the doomed co-op fails to work in a big market currently dominated by a couple of carriers (like Blue Cross and Aetna in Philadelphia), maybe Cigna will find a way to ride in on a white horse with some cockamamie plan to save the day, or, at very least, split spoils with BC and Aetna. In the end, no matter what the outcome, Big Insurance will still win. I remember the days in the 1980's when independent staff-model and group HMOs were failing. Carriers waltzed in with PPOs and built their (now indomitable) position by acquiring those HMOs and selling providers on participating in their so-call "less restrictive" networks. The Big Carriers found a way to turn the fear and angst most employers and providers felt toward managed care at that time into a system of healthcare delivery and finance from which few have every been able to escape. What do they call that psychological condition when hostages fall in love with their abductors? In my 30 years in this business, I've seen medical providers and employers taken hostage by Big Insurance. As suffering, long-term hostages, they're truly scared to death to leave their abductors because the managed care companies have so completely brain-washed them that they cannot live without the Big Insurance business model. So co-ops will only solidify Big Insurance's strangle-hold of American healthcare. If it's tried, it's bound to fail. And, sadly, all those hostages who glimpsed the co-op approach and held a brief glimmer of hope for freedom from captivity, will have to sink back into hopelessness. Never fear, though, their insurance carriers will reassure them: "Don't worry, things will get better."

In a Previous reply, I was taken to task for not being completely clear on who I am. I have an insurance agency that sells Health Insurance. It is the super-majority of our business. I am not a shill for any insurance company and have very little loyalty to any of them, and they feel the same way about me. I would also like to speculate that if and when the "public option" is replaced with the term "co-op" or "health Insurance exchange", that Mr. Potter will be in support of the bill. I believe that Mr. Potter is biased towards nationalizaiton of the industry and will change his writings to say whatever moves towards that goal. I am against the "co-op" or "exchange" because it will attract insurance companies to issue policies from States in the States where the laws do not offer consumers the same protections that their own State might. For example, in Illinois, children are covered to age 26, mini-Cobra is 12 months, Mamograms are covered at 100%, birth control pills, fertility, mental health, and rate protection. States will be incented to lower their consumer protection to attract insurance business to their State. Carriers offering policies in States without those benefits If Indiana has less extensive pollution laws, versus Illinois, BP might expand their plant to dump into Lake Michigan from Indiana. Co-ops and exchanges will simply encourage minimization of consumer protection. I know by a few comments that I am percieved as an angry right-winger. I am not. (Well, check that... I am not a right winger)