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$3.8B in federal loans available for insurance start-ups

St. Paul, Minn. — You may have heard of rural dairy co-operatives, utility co-ops, maybe you even shop at a grocery co-op. They're all based on a similar premise: members own and operate an enterprise for their mutual benefit.

The federal health care law is encouraging private groups to form insurance co-operatives by making available $3.8 billion in start-up loans.

Co-ops could have a tough time breaking into the Minnesota market.

The federal government's vision for health insurance co-operatives would look like this: consumers and small businesses would band together to offer health insurance as non-profits. Members would elect the board of directors, a majority of whom would be enrolled in the plan. Any profits would go right back into plans to lower premiums, improve benefits, or expand enrollment.

Bill Oemichen serves on the program's federal advisory board. He's also President and CEO of the Co-operative Network, representing more than 600 member co-ops in Minnesota and Wisconsin. Oemichen says the program seeks to increase competition and give consumers a stronger role in their health insurance.

"Because the board directors are a consumer, they're really going to be thinking how can we serve our customers," Oemichen said.

For at least a year, Oemichen and several other groups have been trying to start a rural health insurance co-op in Minnesota called 40 Square , but getting state approval has been difficult. He's reluctant to talk about the project because he doesn't want to get farmers' hopes up that it will be available soon.

The idea of co-ops is a familiar concept in Minnesota. The secretary of state's office says there are 777 active co-ops in Minnesota ranging from credit unions to utilities to dairies.

The concept of farmer health insurance co-ops, particularly in the Midwest, isn't new either.

During the 1930s and 40s, rural insurance co-operatives had a strong presence in the U.S., said Timothy Jost, a health policy scholar and law professor at Virginia's Washington and Lee University. Most collapsed after the government withdrew its support through the Farm Security Administration. Jost is cautiously optimistic about the future of co-ops under the federal health care law.

"It's going to be difficult to get these things going, Jost said. "There is the possiblity that if people really want consumer-owned co-ops that they do have some advantages and be able to get them going.

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