A health insurance cooperative is basically a group of people who come together, start a company, and insure each other. Cooperatives like these are formed for a wide range of reasons, including rejection from already formed health insurance companies. In general, co-ops are difficult to get started, and health insurance cooperatives are no different. The newly fledged company must set up contracts with doctors and hospitals, in addition to having the capital to pay for major injuries and illnesses immediately. Sometimes, there is some confusion between actual health insurance cooperatives and a cooperative group bargaining for health insurance with an established company.
Insurance cooperatives are consumer-run companies that operate similarly to regular insurance companies. The insured pays a premium each month or other determined time, and his or her health care costs are covered to a specified extent. Joining a cooperative instead of a regular insurance company can save money on premiums, especially if the company is not-for-profit. The primary drawback of co-ops is their limited network, because not every health institution is willing to accept a small, newly formed insurance company.
The appeal of a health insurance cooperative varies from person to person. Some people are happy to be part of a consumer-run business instead of deal with large, private health insurance companies or the local government. Other people are not illegible to receive health insurance through private companies because of preexisting conditions and see co-ops as a way to manage their health care costs. Some people might have had a bad experience with the government or private business and decided to give co-ops a try.
Whether a person is attempting to start a food cooperative, housing cooperative, or insurance cooperative, he or she will meet hurdles. Starting a company is a time-consuming and demanding job that often requires a significant amount of money upfront. It is also necessary to figure out the claim filing process, how to prevent insurance fraud, and meet the local government’s licensing requirements of such a business. Even if a person manages to successfully start a health insurance cooperative, there is no guarantee it will not fail within the months or years to come.
Lastly, there is a difference between a health insurance cooperative and a group of people who have decided to buy insurance together. The first is a consumer-run company, and the second is simply a group of people attempting to get a better deal on health insurance through an already established company. True health insurance cooperatives normally do not purchase health insurance; instead, they provide it directly.