Public Option

A Public Health Insurance Plan Makes Reform Work 

IOWA FEDERATION OF LABOR, AFL-CIO
ROUNDTABLE DISCUSSION
December 14, 2009

What we are asking for: A public health insurance plan should be an option for everyone, alongside private health insurance plans. The public health insurance plan would compete on a level playing field with private plans and would be administered by government but funded through premiums.

A public health insurance plan makes coverage more affordable:

• Escalating health care costs are a growing burden for working families, employers and the government. A public health insurance plan will have lower administrative costs than private health insurance plans and it will not have to earn a profit. These features, combined with its ability to establish payment rates, will result in lower premiums for coverage through a public health insurance plan.

• Through competition, even those purchasing coverage through a private health insurance plan will benefit from lower costs. When premiums are lower, that means less spending on federal subsidies for those who qualify for financial help.

A public health insurance plan drives quality improvements and more rational provider payments:

• A public health insurance plan can introduce quality advancements and innovation that private insurance companies have little incentive to implement.

• Just as Medicare has led the way with payment reforms that are driving quality improvements now being adopted by private plans, a public health insurance plan can develop innovative payment mechanisms, expand quality incentives and adopt evidence-based protocols.

A public health insurance plan promotes competition and keeps private plans honest:

• Consolidation in the private insurance industry has narrowed price and quality competition. In fact, in 2005, private insurance markets in 96 percent of metropolitan areas were considered highly concentrated and anti-competitive, which left consumers with little choice.
 
• A public health insurance option, coupled with a more regulated private insurance market, will break the stranglehold a handful of companies have on the insurance market and will give consumers enough choices to vote with their feet and change plans.

A public health insurance plan guarantees stable and continuous coverage:

• Private insurance plans can change their benefits, alter cost-sharing, contract with different providers and move in and out of markets. A public health insurance plan always will be there to provide coverage when it is needed and it offers security as we build a new system of highly regulated private health insurance options.

• A public health insurance plan available to everyone will provide rural areas with the security of health benefits that are there when rural residents need them, just as Medicare has been a constant source of coverage while private Medicare Advantage and Part D plans churn in and out of rural areas every year.

The public supports a public health insurance plan option.:

• Opinion polls have shown that voters support a public health insurance plan by significant margins, from 59% to 73%, even when they hear the sharpest insurance industry attacks.

Private health insurers are fighting to make sure no public health insurance plan cuts into their market at a time when we’re enacting reforms to cover everyone. Some of the compromises offered would let private plans have their way:

• Some compromise proposals would hamstring a public plan so much that it would look and act just like a private plan and couldn’t achieve the savings and stability we need.

• Another compromise, called the “trigger” proposal, would let private plans run the show and a public plan would only kick in later under certain conditions. But this “trigger” will never get pulled. It’s just a way to put off indefinitely any hope of a public health insurance plan. That’s the same promise we heard when Medicare Part D was enacted with only private plans participating, and we have never seen a Medicare-provided drug benefit.