United Agricultural Benefit Trust Spotlighted As Model For Healthcare Cooperatives
The nonprofit based in Irvine provides insurance to about 15,000 Californians and Arizonans mostly working in agriculture.
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.
Scores
of California co-ops went out of business in the 1970s through the
1990s. Kofman points to Sunkist Growers and Packers Benefit Plan Trust,
formerly based in Fresno, as an example. It was once a licensed
insurance co-op that covered about 23,000 people. When it fell into
insolvency because claims outpaced income in 2001, employers and
medical providers were left holding the bag for about $11 million in
unpaid medical claims.
In the worst cases, co-ops were run by
individuals who drained the assets through administrative fees and
embezzlement. The epidemic of scandals led lawmakers to move toward
tighter regulation.
Successful operations like the United
Agricultural Benefit Trust have to file with California’s Department of
Insurance. However, they still have lower capital requirements, so they
don’t have to put as much money away as traditional insurers do.
About
2,500 businesses buy insurance through the agricultural trust.
Employers like it because it’s cheap. They say quotes from the co-op
are generally 10% to 15% lower than those from the bigger providers.
And people in the co-op are essentially shareholders.
William
Goodrich, president and chief executive of the agricultural trust, said
the low costs were linked to its nonprofit status. The governing board
is made up of nine volunteers.
"We’re not looking to turn a profit," Goodrich said. "So there’s even more money available to cover our members."
Co-ops
drew national attention recently after Sen. Kent Conrad (D-N.D.) called
for the creation of a system of co-ops that could be started with
government "seed money."
Goodrich said his co-op worked well
because it was narrowly tailored to the agricultural market in Arizona,
California and parts of Mexico. But he is leery of the government’s
ability to operate such a business.
"If we’re talking about a government official walking in and telling us how to run a co-op, it’s not the same thing," he said.
There
are other concerns. Private insurers can screen out people more at risk
for serious illness, hedging against the danger of expensive and
frequent medical bills, said Jamie Court, president of Consumer
Watchdog, a Santa Monica group that monitors insurance practices. The
fear is that co-ops will attract high-risk people who would otherwise
go uncovered, which could bleed a co-op’s funding dry, he said.
Court
also maintains that the co-ops’ small size would work against them if
operating on a scale as large as Sen. Conrad’s proposal. "Co-ops are
simply too small to have any real bargaining power," he said.
Private
companies insure millions of people and have accumulated massive pools
of medical providers because doctors want in on the network. Doctors
and pharmacies are willing to take lower rates when dealing with the
big insurers because they’re guaranteed large numbers of patients.
But
some medical providers that deal with the agricultural trust say it is
better than many larger insurers because it has a good turnaround rate
for payments and is quick to respond to problems. Claims take about 14
days, while they may take a month with large insurers.
Member
Juan Martinez said the difference between the co-op and traditional
insurance providers was customer service. He learned that 13 years ago,
when a doctor said he needed an MRI for headaches. Martinez’s insurer
at the time said he didn’t qualify. And after more than a month of
phone calls, he was denied the test.
Martinez later began work
at Mack Ramsay’s strawberry packaging plant and joined the co-op. When
another doctor prescribed an MRI for the same ailment, he got it in two
days. (He was fine, it turned out.)
With his previous insurer,
"I had to call and call," he said. "With this one they did everything
for me. They’re more considerate about the people."
Quick
turnaround and business with a personal touch are hallmarks of a co-op,
Goodrich said, something bigger insurance companies can’t offer.
"Because we’re small, we do a lot that they’re not able to do."
Contact the authors at: william.hennigan @latimes.com and [email protected]
