Every year, Santa Ana strawberry farmer Mack Ramsay pores over health insurance plans for his 35 employees, checking out prices, coverage, deductibles and other fine print from giants like Blue Cross, Blue Shield and Aetna.
For 21 years he has chosen instead a little-known, nonprofit healthcare cooperative based in Irvine that provides insurance to about 15,000 Californians and Arizonans mostly working in agriculture.
Now, as Congress examines ways to overhaul the nation's healthcare system, the co-op has found itself in the national spotlight as a model for a proposed co-op option consumers could consider along with private insurers.
The United Agricultural Benefit Trust works like a commercial insurer, negotiating rates with a network of doctors and hospitals, but it is owned by its members. Many of them, like Ramsay, say co-ops offer better service and are cheaper because they don't have to turn a profit. But critics say co-ops, which are not as tightly regulated as other insurance providers, are susceptible to insolvency and would not work on a large scale.
California Insurance Commissioner Steve Poizner said co-ops like the agricultural trust faced the same challenges as other insurance or shared-risk entities, with one added vulnerability: If a whole industry is hit hard financially, that could ruin a co-op. But "with the correct oversight, they can be successful," Poizner said.
Co-ops are formed when groups of small-business owners band together and use strength in numbers to negotiate lower insurance premiums. The agricultural trust was founded in 1983 by farm and ranch owners who had struggled to find insurance for their laborers because providers were reluctant to insure migrant workers.
Co-ops are able to keep low rates because, unlike traditional insurers, they're exempt from taxes on premiums, said Mila Kofman, Maine's superintendent of insurance.
Kofman, who has spent years studying co-ops, said they were also exempt from "assessments that fund state safety net programs, such as guaranty funds, which pay claims when an insurer becomes insolvent."
This can be dangerous, Kofman said, because co-ops don't have this safety net. And co-ops have a long history in California of being unable to pay claims as a result of insufficient funding and inadequate reserves.
"Many times it becomes a question of whether the trust will be in business when you really need it," she said.
