Many people have heard about health insurance co-ops (cooperatives) but it seems that not so many of them know what exactly they are all about, what benefits they deliver and what drawbacks they posses. Some will find these co-ops useless, other will be attracted by their pros and suitable for their insurance needs. So before you say your yes or no to insurance co-ops, learn what they are in essence first.
Health insurance co-ops are special payment organizations specialized in providing their members with health insurance plans for a lower price than private insurance companies, and thus competing with them for the customer.
Co-ops are mostly member-owned, meaning that they are run by people who actually have their insurance policies with the cooperative. It’s like a hospital that is owned by the patients who get treatment and services in it. Typical co-ops have thousands of active members, which explains the low cost of an individual policy obtained through them, because the costs are spread throughout all members. And because co-ops are not profit-oriented entities, there are virtually no administrative costs and additional fees making your insurance rates as close to real as it gets. Moreover, since there’s no profit involved, this also means that co-ops don’t face tax liability, which allows dropping the costs even lower.
Think of co-ops as credit unions that are entirely owned by their members. Because there’s no real interest in profits and all members get what they pay for this allows getting better interest rates, higher return on investments, better loans and attractive discounts that are not taxed.
Health insurance co-ops have already been established in some states of the US and are commonly formed by specialized business communities. For example, farmer groups in California have their health insurance co-ops. But co-ops are not limited to health insurance only, as there are other types of insurance like car or homeowners that are also available through co-ops.
Any type or size of organization can form a co-op for providing cheap health insurance to its members. It can be a big company serving its employees, or a local hospital serving its patients. Think of the variety you see on the credit union market to fully understand the wide range of forms and sizes health co-ops can have.
The major benefit co-ops bring to its members is that it’s one of the best forms of cheap health insurance available for an individual. Because there are numerous members, co-ops have much greater negotiating power with insurance companies than individual customers have. And the fact that there is neither profit nor taxes involved makes it even cheaper.
The major disadvantage of health insurance co-ops is that they quite often don’t fall under strict state regulation, allowing situations when you don’t get sufficient insurance coverage. With individual plans you have exact coverage amounts and your insurance company is obliged to cover you no matter what. But with co-ops, if your cooperative runs out of money you won’t get the coverage you need in case something serious happens.