Frustrated with your health insurance company? Well, you may soon have another option: a health cooperative. The model lets people who buy insurance make decisions about how the company is run. And co-ops are eligible for four billion dollars in federal funding from the Affordable Care Act. Colorado Public Radio Health Reporter Eric Whitney says there’s interest in launching one here.

WHITNEY: The provision in the Affordable Care Act that offers money to start new, consumer-owned health insurance companies isn’t well known, but Bill Oemichen says it has a lot of potential. Oemichen is the CEO of the Cooperative Network. It helps launch and support all kinds of cooperative businesses in Minnesota and Wisconsin.

OEMICHEN: Health care co-ops are a very successful business model in the upper mid-west, and I'll be demonstrating that success to you.

WHITNEY: Oemichen is running through a batch of slides for a group of about 40 very interested people brought together by The Colorado Health Institute recently. He tells them that some of the country's biggest businesses are organized as co-operatives, everything from credit unions to petroleum refiners.

The cooperative part is important, because the federal money can only go to new, cooperatively owned insurance companies.

And Oemichen says co-ops are proven to work for health insurance.

OEMICHEN: I helped form 5 years ago the Farmer's Health Cooperative of Wisconsin. It provides insurance now to about half the dairy industry in the state of Wisconsin, it's the largest industry in the state of Wisconsin. And farmers were having trouble getting access to health insurance, so we banded together with co-ops and farmers and others, and last year we were actually 'profitable' enough that we did a patronage distribution. We distributed cash back to the members.

WHITNEY: That means people who bought health insurance got money back at the end of the year. The company can do that because it's cooperatively owned. Customers own and run the company for themselves.

That idea, and the fact that the White House is offering billions in loans to set up new co-ops for health insurance is what's drawn everybody here to get the details.

PRAMENKO: we're not just here talking about setting up an insurance company to compete with the other insurance companies. We're talking about a new model of insurance company.

WHITNEY: Dr. Michael Pramenko says the new model is based on how health care is done in places where costs are low, and quality is high. Places like Grand Junction, where he works. There’s no co-op there, but Grand Junction doctors work closely with the local non-profit insurance company, and get rewarded for keeping people well. Pramenko is one of two Coloradans on a federal advisory board to help set up health insurance co-ops.
He likes co-ops because any money they take in over expenses, gets invested back in the company, for the benefit of its member-owners.

PRAMENKO: That's using money that would otherwise go to shareholders 2,000 miles away, or for a yacht in the pacific, to help facilitate health care at the local level.

WHITNEY: Pramenko and others on the co-op advisory board told the crowd that there are federal loans available to help them plan new cooperatives, and after that, bigger loans to actually capitalize new companies.
So, will anybody try to start one in Colorado?
Leo Tokar, a vice president a Denver insurance brokerage called The Lockton Companies says: Maybe.

TOKAR: it's too early to say if it will happen. There are a number of things just in Colorado that are going to be significant hurdles to get over.

WHITNEY : A co-op would have to round up a network of doctors and hospitals to serve the company’s customers. And, the coop would have to negotiate good deals with those doctors and hospitals so it could be competitive. That's not easy to do unless you already have a lot of paying customers – a bit of a chicken and egg problem there.
New companies also have to have a lot of money in the bank on the first day they open. They need it to pay claims, and because state law requires insurers to keep big cash reserves.

TOKAR: Unless there is a consumer group, and employer group, or a regional provider system that really decides to take a leadership role in doing this, then it won't happen.

WHITNEY: That means if a co-op health insurance company is going to start in Colorado, it'll probably be done by a clinic or health care system that's already up and running. Or by some kind of existing big group or association. Some group whose members have a particularly hard time getting affordable health insurance.

SWENSON: My name's Leland Swenson, I'm the executive vice president with the Rocky Mountain Farmer's Union.

WHITNEY: Swenson says the Farmer's Union just might take the plunge and try to start a cooperative health plan for their members.

SWENSON: First of all, we have a number of health insurance companies pulling out of Colorado and abandoning rural areas.

WHITNEY: Second, Swenson says, farmers are familiar with co-ops. They're probably already members of at least one to get electricity, maybe another to buy supplies or market their products. And the Farmer’s Union already has it’s own cooperative development center that helps members band together to be more powerful in agricultural markets. So setting up a brand new co-op may not look as intimidating to the Farmer's Union.

SWENSON: We have expertise we can bring to a discussion of the formation of a health co-op, and talk about those particulars.

WHITNEY: If the Farmer's Union or any other group decides to give a health insurance co-op a try, they can apply for federal loans to get off the ground. Knowledgeable observers say Colorado could get up to $40 million.
Does that sound threatening to the companies that are already big players in Colorado's health insurance market? Hard to say - Kaiser Permanente, United Health Care and the Colorado Association of Health Plans all declined to be interviewed for this story.
Bill Omechin at the Cooperative Network in Wisconsin says the big insurance companies are waiting to see if anyone in Colorado will take up the challenge.

OMECHIN: they understand the potential threat from this co-op development that could occur, but I think right now they think it's going to be hard for people to band together to form these co-ops, so they're not really concerned that much that competition's going to be a problem for them.

WHITNEY: That being said, some experts say there’s market demand for something new in Colorado.

YONDORF : I think there are some concerns about the extent to which the marketplace is delivering what consumers need.

WHITNEY: That’s Barb Yondorf, a former Colorado insurance regulator who’s now a consumer advocate. She’s also on the federal advisory panel for the new co-ops. She’s hopeful that if people see a chance to buy in to a new kind of insurance company, one where they can call the shots, they’ll respond and a start-up will be successful.

YONDORF: some consumers have choice, but a lot of those choices are privately owned insurance companies, and not necessarily run in the interest of the consumers, per se, but in the interest of investors.

WHITNEY: The federal government plans to start taking applications for health care cooperative start-up grants this fall. Successful applicants can get one loan to cover planning expenses this summer. After that, a second round of loans would go out to help new companies get up and running by the spring of 2013.