DES MOINES, Iowa -- Cliff Gold jokes that he sometimes feels like
Michael Corleone, the reluctant mobster from the Godfather movies.
when I thought I was out, they pull me back in," Corleone famously
complained after a failed attempt to escape the mafia life.
don's workdays included ordering hits against rivals. Gold's career has
been a bit less dramatic. He spent 30 years designing and marketing
health insurance plans. He retired in 2008 from Wellmark Blue Cross
& Blue Shield, the Des Moines-based giant where he'd been a top
executive. He was relaxing in San Diego, where he planned to live part
time, when his friend David Lyons called from Iowa in 2010 with a
proposition he couldn't refuse.
Congress had just passed a
sweeping health reform law. An obscure part of it aimed to encourage a
new kind of health insurance organization, under which consumers would
join together to form their own carriers. The idea would be similar to
the co-ops that rural residents formed to deliver electricity and
farmers formed to buy supplies and market crops.
Lyons, a former
state insurance commissioner, thought Iowa could be a perfect spot for
such an effort. Wellmark controls 86% of the state's market for
insurance sold to individuals and 64% of policies sold to small
employers. No other carrier has more than a few percentage points.
predicted Iowans would be hungry for a new option, and he asked his
friend to join him in offering one. Gold was hesitant at first, but he
believed Lyons was onto something. Within a few months, he was back in
Des Moines, helping his old colleague write a proposal.
company, initially called Midwest Members Health, announced last winter
that federal officials had agreed to lend it up to $113 million to get
started. The organizers hope they won't have to tap most of the federal
loans, because premiums should be enough to cover members' health care
costs. The loan offer is there to assure consumers, state regulators and
medical providers that the company has enough assets to stay in
business for the long haul.
The organizers were relieved when the
Supreme Court ruled this summer that President Barack Obama's overall
health reform law was constitutional. And they were glad to see voters
re-elect the president, who has promised to see the law fully
implemented. Another result in either case could have crimped the
"It would have affected our business plan, but not
necessarily our existence," said Gold, 59, who is the company's chief
Food court of insurance options
company, now called CoOportunity, plans to market policies to Iowans
and Nebraskans mainly through new health insurance exchanges. The
exchanges, scheduled to open next fall, are to be computerized systems
that help consumers and employers compare and purchase policies from
Gold said the format should help small
organizations compete with big companies. He likens the situation to the
food court at a mall, where various restaurants compete for shoppers'
"Everybody is presented equally," he said. "They have
the same amount of space, the signs have to be the same size, and
everybody eats in the same place."
One of Wellmark's main
advantages is that it has set up an extensive network of hospitals,
clinics and doctors that have agreed to treat the insurer's members for
relatively low, negotiated prices. The new co-op has bought the rights
to use a network organized by an Omaha firm, Midlands Choice, which has
signed up all of Iowa's hospitals and more than 90% of the state's
doctors. An established Minnesota company has agreed to handle billing
and customer service functions.
Small staff takes on insurance giant
has 17 employees working in modest office space in Des Moines. Its
leaders plan to add about 23 more within two years, while farming out
most chores to its partner companies. Lyons, the new firm's chief
executive officer, said the small administrative costs should help keep
The company's goal is to attract 50,000 members in Iowa and Nebraska within five years.
of people say we'll probably blow the lid off that, but it's a number
we're comfortable with," Lyons said. He says the company is prepared to
expand quickly if more consumers choose its policies.
comparison, Wellmark has more than 2 million members in Iowa and South
Dakota. Lyons said he'd be satisfied if the co-ops' main effect is to
keep bigger companies honest by offering consumers a ready alternative.
Iowa may have niche for co-op
regulators have approved 23 new insurance co-ops. Many are in rural
states, such as Iowa and Nebraska, but others are in more urban states,
such as New York and Massachusetts.
"Part of it depends on whether or not there were crazy people like us around to put one together," Gold joked.
Jost, a law professor at Washington & Lee University in Virginia,
said the government started numerous health care co-ops in the 1930s.
Those organizations flourished for a while, but most of them folded
after the government pulled back and many doctors expressed hostility. A
couple of them are now in existence, including a successful one in
Wisconsin, said Jost, who specializes in health care law.
said it's hard to predict how well the new co-ops will fare, but he
expects states with highly concentrated markets like Iowa's could have a
more obvious niche to fill.
Jost said many companies have shied
from entering the individual insurance market because of fears they
would wind up attracting mainly people with serious health problems,
which could quickly drive them into insolvency.
"What you really
worry about when you're offering policies in the individual market is
not people with colds or the flu," Jost said. "It's people who need
heart transplants or chemotherapy."
The health reform law helps
deal with that problem by forming a pool that will force insurers with
low-cost members to subsidize those with high-cost members.
Co-ops need insurance executives
Yondorf, a health policy expert from Colorado, said although the co-ops
are supposed to be overseen by consumer-run boards, it's crucial that
they have experienced insurance experts running the day-to-day
Yondorf was co-chairwoman of a national advisory
committee when the new co-op system was designed. She sees a strong
niche for co-ops that provide personal customer service and demonstrate
that they have strong ties to the community.
"A big model for them
should be credit unions," she said. "Credit unions are competing
against huge banks, but they're really expanding very quickly."
says the co-op model should be assisted by the fact that under the
health reform law, consumers who switch to a new insurer will be able to
switch back a year later if they're unsatisfied.
rule takes effect in 2014, consumers would have to worry that if they
leave their current insurer, the company could decline to take them back
or could charge them higher rates because of a pre-existing health
TONY LEYS, The Des Moines Register