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Nonprofit Cooperatives and the Health Care Debate

This week’s debate about the Obama administration’s health plan has focused on a “nonprofit co-op” alternative to a government-owned insurance plan.

I started to wonder, what exactly are nonprofit cooperatives? Tuesday’s New York Times describes them as private, nonprofit, consumer-owned providers of health care, much like the co-ops that offer telephone, electric, and other utility services in rural areas. My understanding of co-ops is that one of the key characteristics is that they are owned and governed by the customers.

The Times article reports a study done by University of Wisconsin professor Ann Hoyt “that there are nearly 30,000 cooperatives with revenues of more than $650 billion a year. They include farm co-ops, retail food co-ops, rural telephone and electric co-ops and credit unions—entities as diverse as Ace Hardware, The Associated Press, Blue Diamond Growers and Ocean Spray.”

I asked Chuck McLean, GuideStar’s VP of Research, what we could learn from GuideStar’s database about nonprofit co-ops. Chuck points out that many cooperatives are not tax-exempt and thus not in our database. In fact some co-ops are even for-profit, so it gets even more confusing. Furthermore, there’s a big challenge with assigning the correct NTEE taxonomy code to a nonprofit co-op, which makes finding it on GuideStar more difficult.

Chuck’s research finds that there are currently about 1,300 tax-exempt nonprofits coded as cooperatives in the IRS Business Master File. About half of them are telephone and electric co-ops, and these organizations account for the overwhelming majority of nonprofit co-ops’ revenue and assets. Only 16 of the organizations are involved in providing local health care.

I have a hunch that if this idea about nonprofit co-ops continues, it will also spill over into the already heated debate about describing what is a “nonprofit health organization” and how they differ from for-profit hospitals in service and price. Soon to follow, I’m sure, will be more debates about the appropriate levels of compensation, transparency, and accountability for nonprofit co-ops.

I’d like to hear more, too, about how officials expect to create nonprofit organizations capable of providing health services to a large number of people. I don’t know much about how health services operate, but I do know that starting and operating sophisticated nonprofit organizations is hard work—and expensive, too. And it takes time to do it well!

Stay tuned as the nonprofit sector gets more involved in the health care debate. Here at GuideStar, we’ll try to add some light to a discussion that has been all too short of solid information.

Topics: Policy