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.