THE FARMER AND INSURER CAN BE FRIENDS: WISCONSIN CREATES A CO-OP FOR FARMERS

THE FARMER AND INSURER CAN BE FRIENDS: WISCONSIN CREATES A CO-OP FOR FARMERS

Volume 28, Issue 493 June 11, 2007

Matthew Gever

Wisconsin farmers have a cheaper way to purchase health insurance thanks to a new version of an old tool.

In April, farmers in America’s Dairyland began enrolling in the Farmer’s Health Cooperative of Wisconsin (FHCW), a group purchasing plan tailored to small farmers and agribusinesses. “Health-care costs are increasing faster than income, and that presents a real threat to the strength of our agriculture economy,” said Senator Dale Schultz.

The FHCW is the first health care co-op in the country with a guaranteed insurer exclusively for those in agriculture, according to the Wisconsin Federation of Cooperatives (WFC). It will operate similarly to a small business pool, using its collective bargaining power to obtain lower rates for its members. The farmers who are joining will not receive direct financial assistance from the state, but will pay the premiums themselves. The co-op will be different from most other purchasing pools in that it will be member-owned and will have a nine-member elected board of directors.

Aetna is providing the coverage, operating under a three-year contract designed to keep premium rate increases in check by spreading risk across a larger pool and using the bargaining power of a large market. A unique provision requires beneficiaries to make a three-year commitment to the co-op by paying a capitalization fee equal to the first month’s premium plus 10 percent.

Wisconsin law mandates that all health-care cooperatives levy this fee. If a member leaves the co-op before the three years are over, he or she will forfeit this fee. After three years, individuals who have fulfilled their commitment will have their fees refunded. The goal of this commitment is to prevent people from cycling in and out of the program according to the health needs and the costs of coverage, which can send premiums into an upward spiral, according to a WFC spokesperson.

The co-op provides six different plans, ranging from a traditional preferred provider organization to a high-deductible plan linked to a health savings account. All plans contain benefits that are relevant to farming, including coverage of job-related injuries, a benefit for which many farmers do not have coverage. Additionally, the Aetna plans provide prescription drug coverage and $500 per year in free preventive care for each covered family member.

“This is not bare-bones coverage, like so many producers currently have. Rather, it’s quality insurance that includes coverage for injuries that occur in the barn or in the fields,” said Katie Mnuk, project coordinator for the FHCW, in a statement. “We fully expect to be competitive, but even in those cases where we cost more, we offer better benefits for the price.”

The state first allowed the formation of health purchasing cooperatives in 2003, when Governor Jim Doyle signed SB 204. The Legislature amended the law in 2005 and 2006 after negotiations with farmers and people in associated businesses. One of those amendments was AB 926, which clarifies that insurers who sell to cooperatives must negotiate with the co-op as a whole and not with individual members.

The legislation came about after discussions between the WFC and various branches of government, including Congress. “Working with farmers, with the Governor, with members of both parties in [Congress], including Senator Herb Kohl and Representative Dave Obey in Congress, and with the WFC, we were able to make this a reality,” said Senator Jon Erpenbach, sponsor of the co-op legislation.

The co-op has received start-up money in the form of a $72,000 grant from the state Department of Agriculture, Trade and Consumer Protection, a $450,000 grant from the Wisconsin Partnership Fund and a $10,000 grant from AgStar Financial Services. The federal Department of Agriculture Cooperative Programs also will provide a $2.4 million grant for initial operating expenses. WFC members have invested $600,000 in the program.

To be eligible, applicants must be ages 18 to 64, live or work in Wisconsin and derive at least 66 percent of their income from farming. All adults are required to take a health risk assessment within 90 days. The cooperative will use the results of the assessment to help identify potential long-term health problems and treat them before becoming worse. The assessment will not factor into premiums.

Uninsured Farmers: A “Growing” Problem

Farming cooperatives have existed for decades. However, even with the 2003 law, Wisconsin farmers have had an extraordinarily difficult time finding coverage. Many small farms are considered a “business of one,” which means they do not qualify as small businesses and so are locked out of small business pools. Currently, only 6 percent of Wisconsin dairy farmers obtain health coverage through cooperatives or pools, according to a study by the Department of Agricultural and Applied Economics at the University of Wisconsin at Madison.

The dangerous nature of farming also can prevent farmers from obtaining insurance. Farmers have the third–highest rate for non-fatal injuries among occupational groups, according to the National Institute for Occupational Safety and Health. Examples include equipment-related injuries, respiratory problems from spores and organic matter, illness from exposure to chemicals, hearing loss from excessive noise and skin cancer and heat stress due to frequent exposure to the sun.

Wisconsin farmers as a whole are uninsured at rates significantly higher than other state residents. Nearly 20 percent of Badger State farmers go without any type of health coverage, according to the UW Madison study. By comparison, only 10.5 percent of Wisconsinites overall are uninsured, according to the state’s Department of Health and Family Planning. For those farmers who do have insurance, the coverage is often minimal or leaves family members uncovered.

A growing a number of farmers have had to seek off-the-farm employment to obtain health coverage: about one-quarter of farmers do so. Supporters hope that the new cooperative will provide the affordable access that farmers have gone without, allowing them to continue farming.