So what is it and why is it important? Despite the dire warnings that this bill signals the second coming of Stalin (or Hitler!), in actuality it represents an incremental change from the status quo precisely because a conscious decision was made on the part of its architects to disrupt our existing system as little as possible. The House bill establishes new regulations of the practices of insurance companies and of the product that they offer. But it also introduces a mandate that requires nearly everyone to buy insurance (offering affordability credits to help people who might have trouble affording coverage).
The role of the public health insurance option is to compete with the private insurance companies and make sure they're working to control costs. We don't want to force people to buy a product from these companies and then watch them jack up premiums and try to skirt the quality regulations we're going to put on them. But, you might ask, won't insurance companies already have an incentive to lower costs and provide a quality product so that they can gain market share (particularly since the new bill creates a Health Insurance Exchange that will introduce a more competitive situation)? Perhaps, but I would argue that there's a good chance they won't. Certainly right now they don't:
Several studies show that in lots of places, one or two companies dominate the market. Critics say monopolistic conditions drive up premiums paid by employers and individuals. . .
"There is a serious problem with the lack of competition among insurers," said Republican Sen. Olympia Snowe of Maine, one of the highest-cost states. "The impact on the consumer is significant."
Wellpoint Inc. accounted for 71 percent of the Maine market, while runner-up Aetna had a 12 percent share, according to a 2008 report by the American Medical Association.
According to a 2002 letter from the GAO, the largest insurer in Ohio, Anthem Blue Cross Blue Shield, controlled 32.6% of the health insurance market in the state. The five largest carriers in the state controlled 66.4% of the market. This is actually a pretty competitive situation relative to some other states. So good for us.
The "compromise" being offered by Republicans and conservative Democrats is one in which the public option is dropped and replaced with non-profit co-ops--so far, what exactly these will be hasn't been articulated by anyone (leading one to suspect its proponents don't actually know) but, broadly, these non-profit insurers are supposed to offer the same competition to private for-profit insurers that the government's public option would provide but without all that icky government interference. If we actually started such co-ops from scratch, it's exceedingly unlikely they would be able to do what the public option could do because there are barriers to entering the insurance market that make getting on your feet difficult. The public option wouldn't face those issues.
However, the scariest possibility is that these co-ops wouldn't be built from scratch:
Mr. Conrad’s own state demonstrates the uncertainties surrounding cooperatives. Blue Cross Blue Shield of North Dakota dominates the state’s private insurance market, collecting nearly 90 percent of premiums. As a nonprofit owned by its members, the company would hope to qualify as a co-op under federal legislation, said Paul von Ebers, its incoming president and chief executive.
What the shit? We're going to bring in Blue Cross Blue Shield to compete with insurance megaliths like...Blue Cross Blue Shield? That idea better earn itself a Colbert segment because that's The Craziest F#?king Thing I've Ever Heard. So, as a fan of the public option and a skeptic of the ability of co-ops to replace it, what sort of bipartisan compromise would I, Senator Stanek, agree to? I might be able to get behind the one moderate Republican Senator Olympia Snowe seems to want:
As for the details, Ms. Snowe has been the rare Republican willing to show any interest in a public health insurance plan as an option, though she favors a trigger to institute such a government-operated program only if private health insurers do not make coverage more affordable.
The House bill already contains time-sensitive provisions that are triggered by the conditions on the ground, so to speak, after some amount of time. For example, the House bill helps to pay for itself by imposing a small surcharge on incomes over $350,000. But, written into it, the House bill has automatic adjustments to that tax based on how things look in a few years. If the bill's reforms have saved more than $175 billion by December 31, 2012, then the tax is eliminated for incomes between $350,000 and $1 million. If, on the other hand, savings by that date have totaled less than $150 billion then the tax doubles. Otherwise nothing changes.
So I'm open to the idea of making the introduction of the public option contingent on the rate of premium increases or savings or something over some specified time period: shape up, save money, and provide a quality product, private insurers, and the public option won't be necessary. But if things get out of hand, the public option will be automatically created--no legislative approval or tweaks necessary. Of course the devil is in the details (under what conditions exactly does the public option kick in?) and I think the threat would have to always be there if its purpose is to be served--otherwise insurers could play nice for a while then jack up rates when the pressure is off. That is, the threat should always be on the table, it should have no expiration date.
To me this seems like it has the makings of a decent compromise: if the need for a public option doesn't dissipate within some specified time of these reforms kicking in, the public option will be there. If not...well, we wouldn't need it anyway. Am I missing an important reason this doesn't seem to have been put on the table yet?