Health Insurance Plans: What’s In The Public Option, Anyway?

Finally, we get some more concrete information about the proposed government-run health insurance plan, otherwise known as the public option. It’s already in the House of Representatives healthcare reform bill, but the Senate’s version goes into more detail on what a public option for America would look like. First off, it wouldn’t take effect until 2013; after which it would be included in an exchange (think the Dow Jones or NASDAQ for health insurance), along with private insurers. Small businesses and individuals will be able to take part in the exchange and pool their buying power to buy their health insurance plans at a lower group rate. The idea behind the public option is that, with the government’s negotiating muscle and lack of profit motive, the competition will make healthcare costs lower across the board.  Opponents are skeptical, and believe that there is no way other health insurance providers can compete against governmental subsidies.

Even though the federal government doesn’t need to maximize profits for its shareholders, it still intends to cover most of its costs through the insurance premiums paid by its participants. The Obama administration plans to increase the federal deficit in order to provide initial funding, but hopes to repay the debt through those premiums. However, those revenues may end up smaller than anticipated; the Senate bill also allows states to individually opt out of the public option portion of reform, beginning in 2014. The program will be nationwide by default, but each state can pass legislation excluding itself from it. Further details are unknown; would those states have to pay the portion of federal taxes that goes to cover the public option, or will that money be refunded to their residents so they can buy one of the existing private health insurance plans? It remains to be seen how many state governments would actually take up that offer when all is said and done, but the choice allows some halfhearted “Blue Dog” Democratic politicians from conservative regions to vote for some form of healthcare reform without arising the ire of their constituents.

(Image: Andrew Aliferis under CC 2.0)