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Show the State depends on settling such issues in favor of consumers. One final mechanism designed to improve access and provide essential information to consumers is a purchasing cooperative designed to operate as the sole provider of health insurance for Utah's small businesses and individuals. There are a number of difficulties with a mandatory structure that I hope will be evaluated closely before the Commission moves forward with a recommendation to require small employer participation. First, the Commission should evaluate the problem of the administrative burden and bureaucratic management that is associated with a purchasing cooperative or alliance. If the cooperative is to effectively provide choices to individuals, it must add an additional layer of administration to the existing bureaucracy of the health care marketplace. While it replaces some of the currently decentralized marketing duties, it adds bureaucratic requirements with which health plans must conform. This new bureaucracy has the potential to offset any savings from reduced marketing costs. This is especially true if the alliance tries to balance risk and profitability across plans. Second, the Commission should evaluate the scope of choices offered by any cooperative. A cooperative may limit choice by restricting the choice of businesses and individuals to those plans approved by the cooperative. While the governor's proposal is more flexible than comparable mechanisms which require a single standard benefits package, it still limits those plans that are available and removes the decision making power from employers who want to choose the employee plans for which they pay. The governor has suggested that this choice will result in more individuals choosing managed care options. Two problems exist with this conclusion. First, recent studies are mixed as to whether individuals facing the marginal costs of their insurance premiums will opt for higher cost plans with greater choice of provider or choose managed care. Feldman and Dowd argue that individuals will choose lower cost options, while others suggest consumers are insensitive to these marginal cost differences (Feldman and Dowd, JAMA, 1993). Second, even if more people choose the managed care options, the cost savings such a change will create have likely been overestimated. For example, Lewin-VHI estimate the cost savings associated with the shift to managed care under the President's managed competition proposal will produce only a one percent savings (Lewin-VHI, 1993). Cooperatives designed along the lines proposed in the governor's plan provide a vehicle for further consolidating the existing concentrated Utah provider market. Designers of managed competition, Enthoven and Kronnick, argue that the market gains of managed competition require that an alliance have the authority to divide providers into competing provider networks since providers themselves may not be expected to compete willingly. (Enthoven and Kronnick, 1993). Certainly nothing in the governor's blueprint includes regulation of provider groups that would produce the expected results suggested by managed competition's advocates. Similarly, Enthoven and Kronnick's design is based on an alliance actually directing business towards competitive provider networks (Enthoven and Kronnick, 1989). This guaranteed volume would result in price breaks for an alliance. As volume depends on individual decisions over health plans, the proposed cooperative in the Utah market does not have the authority to deliver volume for reduced prices. With this uncertainty, health plans may hesitate to deliver a price that is dependent on assurance of receiving enough patients to cover fixed costs at the lower negotiated price. While one may raise several concerns regarding the specifics of recent health care legislation, I commend Governor Leavitt and the Utah Legislature for moving forward with a plan based on careful analysis and negotiation designed to expand access while maintaining the strengths of Utah's health care system. About the Author Roberta Herzberg, PhD is an Associate Professor of Political Science and Administrative Director of the Institute of Political Economy at Utah State University. She received her PhD in Political Economy at Washington University in St. Louis were she was associated with the Center for the Study of American Business. She taught at Indiana University and was a research fellow in the Workshop on Political Theory and Policy Analysis for several years before joining the faculty at Utah State. Her research interests focus on American public policy with special emphasis on health care reform and economic policy. Her articles have appeared in several journals including Journal of Politics and Western Political Science Review. Dr. Herzberg currently serves on the Utah Health Care Policy Commission which is charged with advising Governor Leavitt and the legislature on issues of health reform._____________________________________________ 118 HEALTHPRINT COMMENTARY |