Community Healthcare Cooperatives
Executive Summary

The solution for many of America's healthcare challenges is the formation of Community or State Healthcare Cooperatives. In a Cooperative, employers and employees in an entire community could pool their healthcare dollars into a healthcare trust fund. Local trustees of the fund could contract with local and regional providers directly or through insurance carriers to provide services for all of their members and dependents at reasonable rates. Patients could choose which provider and services they want, and providers would be paid promptly. Such a structure already exist - ALMOST!

The structure being recommended is a community or state Voluntary Employee Beneficiary Association (VEBA). VEBAs were established in the Employee Retirement Income Security Act of 1974 (ERISA). Over the years, it has been refined by various IRS regulations and tax reform acts. Thus, it is a tried and tested body of legislation and regulation. Moreover, it has broad acceptance from both political parties, business and labor organizations, government agencies and professional entities.

Congress needs to provide three clarifications: first, allow anyone in the same geographical area to join rather than limiting it to employees "engaged in the same line of business;" second, allow Healthcare Savings Accounts (HSA) that roll over annually and are portable; third, clarify the use of funds for non-taxable wellness, sickness and accident benefits when provided by qualified 501(C)(3) healthcare organizations.

All of these clarifications fall within the original intent of the Congressional legislation, which was to allow employees from 10 or more small employers to collectively form a healthcare trust in order to purchase healthcare on a broader risk-sharing basis. Because of the restriction embodied in the phrase "same line of business," small businesses have been unable to utilize such a healthcare trust. Instead, VEBAs have been used extensively and successfully by large and mid-sized employers.

A Cooperative would make it possible for all employees in the same geographical area to participate in a collective healthcare trust and to purchase healthcare services, including wellness, sickness and accident benefits. A Cooperative will benefit employees from all size organizations, especially employees and their families in small businesses who cannot access large group discounts or who are not covered at all because their company cannot afford benefits. The Cooperative has the added advantage of putting employees and their representatives in the position of designing the benefit plan, while at the same time having fiduciary responsibility for the financial solvency and stability of the trust. Moreover, it gives employees and their dependents more choices regarding health plans, healthcare providers and health services.

Providers benefit because plan designs and reimbursement are actually directed by the people who pay for and use the services. It puts purchasers, participants and providers of healthcare back in charge of healthcare and its delivery system. Equally important, the Cooperative encourages, reimburses and rewards wellness, prevention and healthy life styles.

A Cooperative arrangement could dramatically improve the way healthcare is delivered, simplify how it is paid and include far more Americans in viable, affordable healthcare coverage. Indeed, what is proposed is a simple but significant amendment to the VEBA guidelines that would facilitate the design and intent of the original legislation. Obviously, a Community or State Healthcare Cooperative could have a very positive impact on healthcare for employers, employees, families, unions, physicians, hospitals, clinicians, indeed all purchasers, participants and providers of healthcare in this country. It could well be the most significant healthcare legislation enacted in years and be the most positive healthcare reform introduced in Congress in decades.

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