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Organizational Impact of Rationing Healthcare The passage and implementation of the PPACA expanded health insurance coverage to many who did not previously have health coverage, and mandated that health services organizations promote the uptake of strategies to foster health and well-being that is accessible, affordable, and effective for all who carry health insurance coverage. However, while the main goal and mission of a health services organization is to deliver effective health services, it, too, must operate as a business and perform competitively within the healthcare delivery system. To that end, it may come as no surprise that some limitations and caps are placed on certain procedures, treatments, or health services depending on health insurance coverage type or subscription. In essence, such “rationing” of healthcare is commonplace and may present an ethical dilemma for the healthcare administration leader. As a current or future healthcare administration leader, how might you rationalize the aims of promoting effective healthcare delivery for all who now have coverage extended due to the mandates of PPACA, while minimizing increased costs to deliver services to all and still remaining competitive in the healthcare delivery system? ** Identify a current strategy that the government uses to ration healthcare. Then, describe how this policy may influence your health services organization And explain how this policy impacts healthcare cost and access. Add examples. Report from the States Behind the Scenes of the Patient Protection and Affordable Care Act: The Making of a Health Care Co-op Susan Giaimo Marquette University Abstract A primary-goal of the Patient Protection and Affordable Care Act (PPACA) is to reduce the number of uninsured by making health insurance more affordable for small businesses and individuals. Toward that end, the PPACA encour- ages the creation of nonprofit, member-owned health insurance cooperatives to oper- ate inside each state exchange. Co-ops face significant challenges in entering mature insurance markets, but they also possess unique characteristics that may help them survive and thrive. Using Common Ground Healthcare Cooperative in Wisconsin as a case study, this article traces the origins of co-ops in health care reform at national and state levels and analyzes the political and technical challenges and opportunities facing these organizations. A primary aim of the Patient Protection and Affordable Care Act (PPACA) is to expand access to health insurance to small businesses and individu- als. These groups experience significant barriers to obtaining affordable insurance because they are subject to discriminatory practices by insur- ers and lack the necessary market power to negotiate reasonable premi- ums. While much attention has been paid to the PPACA's requirement for state exchanges through which these groups will shop for insurance and to reforms of insurers' practices, less is known about the PPACA's provision for nonprofit, member-owned health insurance cooperatives (or co-ops) that will operate inside these exchanges. Cooperatives are limited in scope, but they have the potential to strengthen the position and control of small firms and individuals in their health insurance decisions. The author is a member of the Common Ground health care team and previously served on the board of directors of CGHC. Journal of Health Politics, Policy and Law, Vol. 38, No. 3, June 2013 DOI 10.1215/03616878-2079532 © 2013 by Duke University Press 600 Journal of Health Politics, Policy and Law In this article, I briefiy sketch the insertion of a co-op provision in the PPACA and note how this was a compromise solution between progres- sive and conservative Democrats in Congress. I then use Common Ground Healthcare Cooperative (CGHC) as a case study to explore the political and technical challenges facing the creation and implementation of coop- eratives at the state level. Located in Wisconsin, CGHC is one among the first wave of co-ops to receive federal funding under the PPACA. I conclude with an assessment' of the possible impact that co-ops may have on the US health care system. Problems of Affordability in the Small Group and Individual Insurance Markets Small firms and individuals face specific obstacles to finding affordable health insurance that large employers do not. Eirst, small employers and individuals are subject to medical underwriting practices that place insur- ance out of reach. These include the use of experience rating to calculate premiums according to the expected or actual health use of the customer and exclusion waivers that preclude certain common health conditions from coverage. Perhaps the most insidious practice is the preexisting con- dition clause, which absolves insurers from current coverage of any medi- cal condition that a client had—even if it went untreated or undetected— in the year prior to the start of the insurance policy (Stone 1993). Sec- ond, and related to medical underwriting, the administrative costs are much higher than for a single policy that covers a large employer, and the premiums in the small group and individual markets refiect such costs (Sered and Eernandopulle 2007: 114). Third, unlike a large firm, small businesses and individuals seeking to purchase health insurance are too atomized and too small to exert the necessary market power in negotia- tions with a few large insurers. Coverage figures attest to the difficulties that small firms and individu- als face. In 2012 only 35.7 percent of firms with fewer than fifty employees offered insurance, while 95.7 percent of firms with fifty or more work- ers did so (Kaiser Eamily Eoundation 2012b). Between 1999 and 2012, premiums for employer-based insurance rose from $5,791 to $15,745 for family coverage (Kaiser Eamily Eoundation 2012a). Whereas large firms must absorb single-digit annual increases in premiums, small firms and individuals routinely face double-digit annual rate hikes of 30 percent or more (Jacobs and Skocpol 2010: 111; Jagler 2012: 21). Giaimo • Report from the States 601 Cooperatives under the PPACA To rectify these problems, the PPACA requires that each state create a health insurance marketplace, or exchange, through which small busi- nesses with fewer than one hundred employees and individuals can choose among competing insurers. All insurance companies must offer minimum levels of coverage and must market their products in easily comparable and understandable formats. The law also provides subsidies for persons with incomes up to 400 percent of the federal poverty line and tax credits for firms with fewer than twenty-five full-time employ- ees that opt to offer insurance. The PPACA also requires insurers in the exchanges to use modified community rating instead of experience rat- ing. All insurers will have to accept any client regardless of health status. The PPACA also inserted a provision for the creation of a nonprofit insur- ance cooperative in each exchange (Healthcare.gov n.d.; Kaiser Family Foundation 2011). A cooperative is a mutual self-help organization whose members join together to enhance their market power. They are member governed and, if nonprofit, must invest surpluses in the services and operations of the organization (Richardson 2011). Rural health care cooperatives sprang up during the New Deal, but most were short-lived (Jost 2011; Richardson 2011). The PPACA gives cooperatives a new lease on life and constitutes a compromise between progressive and conservative Democrats in Con- gress on the terms of health care reform. Many progressives advocated a single-payer health insurance system like Canada's, or "Medicare for all." But moderates saw it as politically infeasible, as a government takeover of health care that would vastly expand federal and state budget obligations. Other reformers proposed a public option as a middle way. The public option would have preserved existing employment-based insurance while permitting a government health plan to compete alongside private insur- ers in the small group and individual exchanges (Hacker 2008). Support- ers of a robust public option maintained that it would inject competition into many insurance markets and, by virtue of its size, would possess the necessary market power to negotiate lower reimbursements with provid- ers (Hacker 2008; Jost n.d.). House Democrats inserted a watered-down public option in their reform bill, but Senate Democrats refused to follow suit. Conservatives within the Democratic caucus in the Senate had more leverage than their House counterparts, and the rules of debate posed a 602 Journal of Health Politics, Policy and Law real possibility that the reform bill might not reach a vote on the Senate floor (Hilzenrath and MacGillis 2009).' For conservative Senate Demo- crats and private insurers, even a circumscribed public option was still too much government (Jacobs and Skocpol 2010: 59-64). Senator Kent Con- rad (D-ND) offered a novel proposal for cooperatives, which he thought would have bipartisan appeal and would at the very least reconcile the different wings of the Democratic Party (Conrad 2009; Gardner 2009; Hilzenrath and MacGillis 2009; Weisman 2009). Conrad maintained that nonprofit, member-governed co-ops with a strong consumer focus could appease advocates of a public option, while co-ops run by and for small businesses and operating at the state level could assuage the fears of those concerned with a government takeover of health care (Hilzenrath and Mac- Gillis 2009; Weisman 2009). While failing to achieve bipartisan agree- ment, cooperatives became part of the Senate bill and the final PPACA.2 Section 1322 of the Affordable Care Act created the Consumer Oper- ated and Oriented Plan (CO-OP) program and provides up to $3.8 billion in federal loans to help cover the start-up costs of nonprofit, member- owned and -operated health insurance companies in each state exchange. According to the law, each cooperative must be governed by its members, have a strong consumer focus, and reinvest any profits in the organiza- tion to improve benefits or health care delivery, or to lower premiums. To ensure that co-ops are truly representative of small businesses and indi- viduals, the PPACA bars existing health insurance companies and state or local governments from creating such entities (Kaiser Family Foundation 2011: 4). The Common Ground Healthcare Cooperative Common Ground Healthcare Cooperative was among the first wave of co-ops to receive federal funding in February 2012. It was established by Common Ground, an organization of religious congregations, neighbor- hood associations, and schools working to achieve positive social change 1. A filibuster allows unlimited dehate on a bill on the Senate floor unless at least sixty senators move to end debate and take a vote on a bill. Democratic leaders in the Senate did not believe they had the requisite supermajority to overcome such a filibuster. 2. Conrad proposed three variants: a national co-op, which he thought might be "too lim- iting"; separate co-ops set up in each state, which would not be viable in states with small populations; or a national co-op with state affiliates, which would allow less populous states to form regional pools with the requisite enrollment numbers to survive (Gardner 2009). Conrad preferred the third option, but the second option became part of the PPACA. Giaimo • Report from the States 603 in southeastern Wisconsin. Common Ground, in turn, is an affiliate of the Industrial Areas Foundation (IAF) community-organizing network. Though established by Common Ground, the co-op is a separate legal entity with its own management and board of directors (CGHC 2012). The creation of CGHC is a story of perseverance and a willingness to adjust to new circumstances. The effort began in 2007 when Common Ground consulted its member