RRG Industry Eyes HC Reform Co-ops As 'Opportunity'

"We are awaiting the details of the proposal, but there would be a great need for actuaries, third-party administrators and other professional help to properly structure the nonprofit co-ops," he said.

"This is akin to any self-insured health benefit plan that a corporation would set up," he added.

Robert H. Myers Jr., general counsel of the National Risk Retention Association, added that the risk retention group model for a health care coop is an "interesting idea."

Mr. Myers said that current law only allows RRGs to offer commercial liability insurance, so RRGs could not offer health insurance.

However, the concept of an RRG–a state-chartered insurance company which can do business in any state under federal law after making a notice filing–is one that could be followed by Congress in developing co-ops. "RRGs have to be in the control of their members, as presumably co-ops would," he added.

In comments Sunday, Kathleen Sebelius, secretary of the Department of Health and Human Services, said a public plan is "not an essential element of health care reform."

While the Obama administration later cautioned that the controversial "public option" is still on the table, Sen. Conrad confirmed that the co-op idea is being examined by the Senate Finance Committee as a compromise.

He said on Fox News Sunday that hope for a government-run public option to be included in a final reform bill is all but dead.

"The fact of the matter is there are not the votes in the United States Senate for the public option," he said. "There never have been. So to continue to chase that rabbit, I think, is just a wasted effort."

He added that support of a public plan to "keep the insurance companies honest" should temper their ambitions for its inclusion in final legislation.

The National Association of Health Underwriters (NAHU) reacted to the Sebelius and Conrad comments, saying, "Americans want our elected officials to work in a bipartisan fashion to forge real solutions to reduce costs, improve quality and expand access and choice.

"Most Americans like their private health insurance coverage and want health reform to strengthen and build upon what is working and address those areas where there are shortcomings," the statement added.

The NAHU statement said negotiators already are discussing ways to add new consumer protections and market rules for guaranteeing coverage for pre-existing conditions, ending the practice of basing premiums on a person's health status or gender, and adding a personal coverage requirement.

"A government-run public insurance scheme would undermine employer-sponsored coverage and pile on significant and unnecessary costs to reform compared to these common-sense approaches," the NAHU statement said.

And Robert Zirkelbach, a spokesman for America's Health Insurance Plans, in Washington, noted that despite Ms. Sebelius' comments, all four bills now on the table call for a public plan.

"We share the concerns that doctors, hospitals, employers have all raised about the unintended consequences a government plan would have," he said. "Accordingly, if we do the type of market reforms and consumer protections that our industry has proposed and which have broad support, a government-run plan in any form is not necessary."

In a "yellow alert" to members, the Council of Insurance Agents and Brokers (CIAB) cautioned that Ms. Sebelius' explicit support for health care co-operatives in her talk show appearances "is going to lead to a frenzied, push-and-pull lobbying campaign to define the contours of such co-ops."

The CIAB alert noted this could delay House action on its legislation.

"There will be continuing ups and downs for the next couple of months on reform," the alert said.

A potential compromise might be reached in which the House would pass a version of "co-ops on steroids" that more closely resembles the full government-run plan alternative, mollifying enough liberals necessary to win the vote, while reassuring moderates, the CIAB alert said.

In her comments on several talk shows about the public option, Ms. Sebelius said, "I think the president is just continuing to say, 'Let's not have this be the only focus of the conversation.'"

Ms. Sebelius said on CNN that the critical areas are "coverage for all Americans, lowering the crushing cost for everyone, making sure that we have new rules for insurance companies, that they can't dump people out of the marketplace if you get sick, that they can't drop your coverage based on a pre-existing condition, that you can't be priced out because you're a woman instead of a man, and gender discrimination won't be allowed to continue anymore."

And, commenting on a provision in several bills about paying doctors to provide end-of-life consultations to elderly patients–as well as on the public option–Ms. Sebelius said on ABC that deleting these provisions are "not deal-breakers."

Moreover, she said in comments that also would be helpful to agents that a priority for the administration "is to stabilize the employer marketplace.

"Small-business owners right now are dropping coverage because they can't any longer afford it," she said. "They can't stay in the market."

Ms. Sebelius said, "With the new tax incentives that are part of health reform, small-business owners would be encouraged to actually stabilize their insurance plans, to offer coverage to their employees.

"They'd have tax credits," she added. "They'd have some help for the low-income employees to be able to afford the coverage."

In his comments to members, Joel Kopperud, a director of congressional relations at the CIAB, cautioned, "There has been precious little detailed conversation about how co-ops would operate."

He said that Sen. Conrad said his proposal would be funded by states, the federal government and co-op members.

"The government could provide seed money, perhaps as loans, but the co-ops would run independently after that," Mr. Kopperud said.

Each would likely have a minimum of 500,000 members, and a national board would likely oversee the system.

In the note to members, Mr. Kopperud said that "if co-ops are limited to small businesses and individuals, and can be marketed through traditional distribution channels, they might well be a welcome element of comprehensive health reform that increases availability and affordability of coverage."