Yesterday we ended with Dr. Dean’s statement that folks will be able to keep their private insurance, if they so desire, once the public insurance option is made available.
But critics on the right say that private insurers will be wiped out by the public insurance option because they will not be able to compete with the low premiums offered. They say that consumer choice, accessibility and the quality of insurance plans, will decline once the public option is made available.
Insurers are committed to defeating this policy proposal at any cost, and have planned an extensive ad campaign to influence constituents nationwide.
Conservative groups generally are gearing up for a major battle: The Health Policy Consensus Group, a coalition of conservative advocacy groups spearheaded by the Heritage Foundation, called the creation of the public insurance option the No. 1 deal killer for health care reform.
So to what extent are these criticisms valid?
First: Would the public insurance option put private insurers out of business?
To be clear, it is difficult to estimate the impact of the public insurance option at this point because the specific details about how such a plan would work have yet to be released.
That said, several research organizations have mapped out different versions of the public plan for the purposes of analysis and debate.
Private insurers have paid particular attention to the Lewin Group’s recent report entitled, “The Cost and Coverage Impacts of a Public Plan: Alternative Design Options.”
This study estimates the number of people who would gain coverage and/or leave their private insurance plan as a result of the public plan.
It takes into account the hospital and doctor reimbursement rates that would be offered by the public plan, and whether this insurance option would be made available to everyone, or just to small employers, individuals and the self-employed.
The study finds that if Medicare reimbursement levels are used by the public plan (which is likely), premiums for the public plan would be roughly 30% less than those for private insurance.
And, according to the study, opening up such a plan to all employers would result in 131.2 million people enrolling, and 119.1 million people leaving private insurance in exchange for the public plan.
This would be a two-thirds reduction in the number of people (170 million) enrolled in private insurance.
Even if private insurers did engage in some belt-tightening, they would lose customers under this scenario.
In response to this study, Jacob Hacker, who authored the version of the public plan that is most widely cited, offered a strong rebuttal.
Mr. Hacker, a professor at the University of California at Berkeley, argues that the Lewin Group looked at a hypothetical proposal that is fundamentally different from the public plan that he designed, and that is currently on the table.
The Lewin Group looked at a hypothetical proposal in which employers could buy into a national public plan by paying the plan’s premium. What’s more, in the hypothetical proposal that the Lewin Group examined, new rules would be imposed on employment-based health insurance that would vastly increase the cost for some firms of providing coverage. No wonder the public plan was projected to be big!
By contrast, all the proposals that are actually on the agenda today have employers buy into an “exchange” that has both a public plan and private plans as a choice within it. Moreover, all these proposals have at least large employers enroll their workers in the exchange by paying a payroll-based contribution, not the public plan’s premium. Finally, none of these proposals includes substantial new regulations on employment-based health insurance.
Hacker predicts that roughly half of working-age Americans would enroll in the public plan, and the other half would remain in employment-based, or other private, plans. His source? An earlier study published by the Lewin Group.
Mr. Hacker is unsure why the Lewin Group would go to such lengths to publish a second analysis that does not really apply to the proposals at hand.
So while it is true that private insurers would face increased competition from the public plan, they would certainly still be part of the healthcare equation. It is predicted that private insurers will have to do a better job at controlling costs to keep up with the public plan, and that those who are unable to unwilling to do so will lose out.
Tomorrow we’ll look at the criticisms mentioned about quality and access.