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  • Health Reform Update – Information on Insurance Exchanges and Cooperatives

    By 2014, almost all citizens and legal residents will be required to have health insurance, or there will be tax penalties.  Each state will be required to set up insurance exchanges for individuals and businesses with less than 100 employees to purchase health insurance (Employers with more than 100 employees can join as of 2017).  There are requirements as to minimum benefit levels to be provided.  Individuals and employers may also obtain coverage through private health insurers or Cooperatives.

     What is a Cooperative (Co-op)?  It is an option to offer health insurance as a competitive alternative to the government run exchanges.  Co-ops are owned by the people who have their insurance with them, called “member-owned.” They are health insurance organizations owned by the patients they insure. They are comprised of thousands of members, meaning the costs of care get spread out across all those people, and this allows them greater bargaining power with providers. Since co-ops are not interested in profits, their costs are real costs, and not inflated by administrative costs. Additionally, because co-ops only collect what they spend, they have no tax liability, keeping costs even lower.   

    A 3rd party administrator is hired to oversee the plan, so employers would not have to handle claims, contracts or network negotiations.  According to the New York Times, Cooperatives for health insurance started in the 1930’s and were dominant in the Midwest.  In fact, Congress actively supported Cooperatives but withdrew support at the time insurance companies as we know them today were formed.

     For more information on Cooperatives, please contact Gary Whiddon at Health Plans Online.  Mr. Whiddon can be reached at (888) 474-6627, ext. 116 or gary.whiddon@healthplansonline.com.

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