Health Insurance in America after the Reform: If For-Profit Health Insurers Find That Business Is Too Unprofitable under the New Law, Where Will Americans Find Affordable Coverage? One Solution May Rise from the Nonprofit Sector Led by Credit Unions, Which Have Already Demonstrated an Ability to Keep Up with For-Profit Banks

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The primary objective of President Obama's 2009 health care reform initiative was to provide health insurance for an estimated 46 million people who did not have it. The Act requires insurers not to reject coverage on the basis of preexisting health conditions, and it requires all citizens to purchase health insurance or to pay a tax should they decline to purchase.

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Omitted from the final version of the Patient Protection and Affordable Care Act (PPACA), passed in March 2010, was the so-called "public option," a government-run health insurance program designed to compete with profit-making companies. Legislation notwithstanding, it has generally been marketplace forces--not government interventions--that have shaped the U.S. future, so we shall examine how these market forces will create a new source of competition for the health-insurance market: nonprofit organizations.

Health Insurance Forecast to 2030

Under the 2010 health care reform legislation, the health-insurance business is expected to become less attractive for investor-owned public insurance companies. This will especially be the case if courts decide that requiring citizens to purchase health insurance is unconstitutional.

More particularly, insurers' inability to reject applicants or to cap the benefits (or even terminate the policies) of patients incurring serious and costly illnesses will make health insurance increasingly unattractive as a profit-making business. As for-profit insurers exit the affordable health insurance market, nonprofit institutions may step up to meet consumer demand.

There are already a number of nonprofit organizations that serve large pools of people, such as credit unions, which may offer their members health insurance. These programs would be administered by large data-processing organizations similar to those that currently have service contracts with Social Security, Medicare, and Medicaid and other state-run programs.

There are now approximately 7,800 credit unions (CUs) in the United States, including federally insured, state insured, and self-insured institutions. These serve tens of millions of members and hold hundreds of billions of dollars in assets, which increased significantly during the recent banking crisis.

Credit unions should have little concern about competing with for-profit insurance companies since they have been competing with the for-profit banks for the past 75 years. Health insurance would be a logical extension of providing low-cost services to members, as well as an extension of their current offerings of health savings accounts.

Interstate cooperatives of CUs--already in existence--could serve a critical mass of insured, taking advantage of their existing institutional infrastructure such as data processing and electronic funds transfer. The CUs would initially offer low-cost health insurance primarily targeted at the uninsured. However, people insured with individual policies or group insurance might also choose CU health insurance as an alternative. In fact, employers could offer CU health insurance as a benefit. As insured pools increase, the number of providers (doctors, hospitals) accepting the insurance would increase and the insurance coverage would become more attractive to the public and employers.

The nonprofit organizations offering health insurance would by no means be limited to CUs. New health insurance companies can be created by all sorts of nonprofits banding together to represent a sufficiently large pool of insured. For example, public radio and TV stations could unite to form insurance groups, as could university alumni associations or retirement funds such as the Texas Teachers Retirement System and the California Public Employees' Retirement System (CalPERS).

The 2010 health care reform act provides for subsidies to people who cannot afford to purchase health insurance. …