Wow, it’s great to see so many people here especially for a topic like health insurance. Very riveting.
I thought I’d start by talking about the history of the co-payment, and then a little bit about co-insurance and whether it applies before or after the deductible, and how it relates to out-of-pocket maximums. Yay! You guys – I’m not really going to talk about that, but I hope it makes you think a little bit about your own experiences in using health insurance. I’m here because we’re starting a health insurance co-op that’s going to be- Yes! Yes! That never happens. Wow! Wow!
No seriously, usually when I say that people kind of get this blank stare and they say, “Okay, yeah, so what? How are you going to be different, and how are you going to compete with the big guys?” And it misses the point. I can talk about all the great things that we’re going to do with benefits and great customer service, but the cool thing really is that we’re a co-op, and that there’s this intrinsic nature of a co-op, and something you can’t feel or touch that’s really cool.
So, my job here is to make sure you all get it, so I’m going to do a little Co-op 101, and then I’m going to talk about how we think it’s going to work in health insurance, and then even more importantly, how we think we can leverage some of the connectedness that comes out of the co-op model to affect even broader change in healthcare. So I’m going to start with the 101 bit.
So all co-ops- I mean co-ops is just a business model and there are three things that all co-ops need to be successful, and the better that they do these things then the more impactful that they are. So the first one is a compelling need. There has to be a compelling need. And then you need an ownership structure, and then you need some intrinsic values. So to illustrate compelling need, I think a good example is the rural electric co-ops, kind of harkening back to our western heritage.
In the 1930s, rural people had a very compelling need and this was it! Yeah. Is it obvious? Rural people were united around their need for light. And it felt weird! But they were very connected, and in the 1930s, FDR put out a low-interest federal loan program for people in rural communities to band together and develop cooperative businesses in their communities to help solve the problem and bring electricity and telephone service to rural America. And it’s one of the best co-op stories, and those entities and co-op businesses still exist today.
So, in health care, there’s also a really compelling need, and it’s even more compelling than electricity, and it has to do with being able to access healthcare. It’s one of those things that is so fundamentally important for our ability to live, and to think, and to be productive in society. This isn’t perfect, but there are ‘haves’ and ‘have-nots’ in health insurance, and about one in seven people in Colorado don’t have access to health insurance. And about one in three either don’t have access to health insurance or don’t have health insurance that really enables them to get the care that they need. And so this guy, he’s your neighbor, he’s your coworker’s spouse, he’s your brother, and we’re all related to him because when he can’t get care, then he goes to the emergency room and we all pay for that care through higher premiums.
Health insurance, it’s a big deal, and it is something that we need to do better in this country. And it’s not as easy as electricity because the people that don’t have health insurance or don’t have adequate health insurance aren’t as well connected to be able to naturally band together to do something about it. So that’s it. It’s a compelling need, we definitely have that in health care.
The second component that really makes a co-op is ownership structure. This is real simple but the first triangle is how a typical investor-run organization is built. And it really starts with the CEO who makes decisions and promulgates them down through management, and then eventually to consumers, and really all with the goal of maximizing shareholder value. And the consumers in that model really become a means to an end.
In the co-op, it flips it on its head, in that the organization exists and was formed by consumers, and the consumers themselves pool together to create a consumer board, which then selects its leadership, or its general manager, which in our co-op is me, and really serve at the will of the membership, and that all decisions are made with the goal of maximizing benefit and return to the members. So it’s this ownership structure that enables a co-op to be able to capture and create a really different kind of value proposition and affect change.
So, back to values. This is a term that we coined in our little co-op, and we’re a little different because we, like the rural electric co-ops, are started by low-interest federal loans. And so we don’t have any members yet. We’re going to have a lot of members on January 1, but we’ve been building a health insurance company for over a year. We’re really excited about being a co-op, but with no members, and so we’ve been trying to shed the existing values that we had coming from other parts of the health insurance industry, or providers, and to say, okay, let’s really figure out how do we foster these values of collaboration and also self- and social responsibility.