A Public Option Will Destroy Private Insurance
By Janet Trautwein
Congress is trying to chart a path forward on health reform. Several congressional Democrats just announced plans to draft a bill that would create a public health insurance option.
That's bad news, given that a public option could destroy the private insurance market -- and deprive the majority of Americans of the employer-sponsored coverage they like.
According to polling data, two-thirds of Americans with employer-sponsored coverage are satisfied with their current plan.
Public option proponents don't want to upset the more than 180 million people with employer-sponsored coverage. So they frame their offering as another choice. Those who like their workplace plans can hold onto them. Those who don't, or don't have access to insurance coverage through work, can seek out the public option through the Affordable Care Act's exchanges.
The public plan is also intended to check private insurers' premiums. A government-run plan would have two advantages over private plans.
First, a public option could offload its administrative costs onto federal taxpayers. Private insurers don't have that luxury. So the public option would have a structural cost advantage.
Second, it could dictate what it would pay healthcare providers. Most champions of a public option envision that it would pay rates similar to Medicare's. Those rates are low. The American Hospital Association says that hospitals receive just 87 cents from Medicare for every dollar in cost they incur caring for its beneficiaries. In 2019, those underpayments amounted to nearly $76 billion.
Private insurers can't name their price. In fact, it's healthcare providers who have insurers over a barrel. Private plans pay hospitals nearly two and a half times what Medicare does for the same service.
Because of its artificially low cost structure, the public option could permanently underprice private insurers. Over time, consumers would switch from private plans to the cheaper public plan. Private insurers would eventually leave the market. By 2033, according to one study, there'd be no private plans available on the exchanges in 14 states.
Instead of enhancing competition in the individual insurance market, the public option would destroy it.
A cheap public plan would also prompt some employers to drop the plans they sponsor for their employees. Doing so could save them money. They could use some of the savings to raise employees' cash wages, but there's no guarantee they will.
An analysis of one public option plan introduced in the House in 2019 found that nearly one in four workers would lose their health coverage through work by 2023. By 2032, that figure would rise to one in three.
Some defenders of the public option claim it will give private plans, especially those sponsored by large employers, more leverage in their negotiations with doctors and hospitals.
But only the largest employers have the kind of negotiating heft to haggle with doctors and hospitals over reimbursement rates.
Further, look at our existing public options -- Medicare and Medicaid. Healthcare providers haven't proved willing to take government-style reimbursement rates from private plans. They've done the opposite.
The public option is back on Congress's agenda. Seven in ten voters support it. Those folks may change their mind when they realize that a public option could spell the end of private insurance.
Janet Trautwein is CEO of the National Association of Health Underwriters (www.nahu.org). This article originally appeared on InsideSources.com.
