The latest public option "compromise" - won't work, not a compromise
Posted on December 7th, 2009 by Jason Rosenbaum in Congress Watch
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Just like the other public option "compromises" (co-ops and triggers come to mind), the latest public option "compromise" - offering the non-profit plans in the Federal Employees Health Benefit Plan (FEHBP) to the uninsured and small business - will neither control costs nor increase competition.
But don't take it from me. Here's Jacob Hacker, architect of the public health insurance option:
Another, even stranger idea is to offer the nonprofit plans available in the Federal Employees Health Benefit Plan (FEHBP) within the exchange. Since the FEHBP is itself a form of exchange, this amounts to offering a new set of private plans within a new set of private plans. How is that going to provide real pressure on private insurers in a consolidated insurance market in which nonprofit plans already have a large presence (and often act little differently from for-profit plans)?
Timothy Jost, an expert in health law, expands on this point:
But the FEHBP, although it provides reasonably good insurance coverage to our national civil servants at a cost pretty much comparable to the private market, is itself simply an exchange, and the Senate health reform bill already has exchanges. There is no value added in building a public option exchange on top of the exchanges already in the bill, as Jacob Hacker points out in his New Republic The Treatment post this morning.
The real problem with the proposal Politico reports is that it would be built, apparently, on existing nonprofit insurance plan. Nonprofit health plans are not part of the solution; they are part of the problem. The purpose of the public plan was to create an alternative to private insurance to allow Americans more choice and thus to bring down costs by reducing concentration in health insurance markets. But nonprofit plans are already the dominant insurers in much of the United States. Of the nations 138 health plans with more than 100,000 medical enrollees, 84 of them, or 64%, are nonprofit. Forty-eight percent of all medical enrollees in the United States are in nonprofit health plans. Nonprofit plans have 54% of the commercial risk market and 42% of the self-insured plan administrative services only market.
There is no expanded competition in this idea because no new players are being added to the marketplace.
Jon Walker adds the final point - FEHBP's premium prices are no better than average, and have been increasing at similar rates to private insurance. The idea would do nothing to control costs:
This is not a public insurance entity competing with the existing private insurance companies. This will do nothing to inject competition into concentrated markets. This will not ensure the government provides people with at least one decent insurance plan structured to promote the public good. In the long run, this will not change how the insurance market operates or help rein in our out-of-control health care costs. (The FEHBP has been a failure on the cost controlling front.)
Those pushing these types of compromises are clearly missing the point. This isn't a compromise because it doesn't provide a way to accomplish the two main things a public option is supposed to accomplish: There is no new competition and no cost controls.
The idea is definitely not a replacement for giving us the choice of a public health insurance option so we no longer have to be at the mercy of private insurance.
I have been a supporter of a public option since the beginning of this controversy. I am certainly willing to listen to the reasons why making the FEHBP available to the general public is counterproductive, but I am afraid your arguments (as presented here) are unconvincing. Please explain why a non-profit plan like this would be problematic.
Marion Polon, Esq.
It's important to take a look at the history, which is what the folks quoted in this piece are doing. Blue Cross, for example, is a non-profit insurance company. It acts for all intents and purposes exactly like a for-profit insurance company, denying care and raising prices just like the others.
So, putting them in charge doesn't really sound like a compromise, right?
1st, "non-profit" insurance programs just fundamentally sound appropriate in dealing with health-care. Seemingly limiting opportunity's for insurance company (for profit)greed.
But also - following along the lines of "the compromise"…making room for non-profit insurance programs, seems like it could potentially open the flood gates for new insurance programs, creating more options for the public, and increasing competition - thus driving prices down.
At least that's the way I see it…
Non-profit sounds good, but it's really not.
Again, Blue Cross, one of the biggest insurers in this country, is non-profit. They were started in much the way this program is pitched as starting. They operate exactly the same as for-profit insurance.
I'll say that again: Non-profits and for-profits in the insurance industry are indistinguishable. Same problems, period.
So more non-profits in our system isn't going to cut it. The problem is not a lack of private or non-profit companies, it's that these companies don't compete with each other by choice. To change that, you need something controlled outside this system.
Non-profit vs profit was just a preface to my ultimate point. With that said, the point of my preface was to suggest that however much "non-profits" operate like "for-profits", conventional wisdom still suggests that A.) Non-profit status is still the most ideal status when it comes to offering insurance coverage and paying on claims. B.) Wasn't the public-option a form of "non-profit" insurance in and of itself?
And to my ultimate point…I'll reference the last paragraph of your latest reply (albeit, using my logic)it reads like one big contradiction. I say this because you open the paragraph with,
"So more non-profits in our system isn't going to cut it…"
Following that up with,
"The problem is not a lack of private or non-profit companies, it's that these companies don't compete with each other by choice…"
But isn't that my point? That the problem is the lack of competition…so inherently, that means that more competitors (whether or not they come in the form of "non-profits, or "for profit" will increase competition, thus lowering prices…And that is the goal right??
So, for the few reasons I just out-lined for you - I still think I'd be justified in pushing-back on your arguments against non-profits and the solution not being found in increasing competition by clearing room for more competitors, whether profit, or non-profit.
Increasing factors of competition should always be the 1st option in a progressive, democratic, capitalistic society. For it's through competition that we find the beauty and benefits of capitalism, driving forward a pipeline of unique business models, concepts, innovation, service, etc…i.e. all the different ways businesses and organizations look to differentiate themselves from their competitors; ultimately looking to retain/keep/attract customers.
So they will be more motivated to please their customers…in other words, we win.
It really doesn't. Again, the Blues were created expressly to do what you, and I, want to do: Increase competition. They didn't. They colluded with private insurers to divide up the marketplace instead of competing. History has reached a verdict on this point: Adding another non-profit in this method will not change this dynamic.
I get that you've got some theories that say these things would increase competition. Experience shows them to be woefully wrong.
Isn't collusion illegal? Why doesn't the government do something about that rather than go about introducing more entities (i.e., bureaucracies) into the system. It seems that if the current players were placed into a true competitive environment we could achieve better results.
For most businesses, it is. But health insurance has exemption to anti-trust laws.
I understand historically that they have been colluding and operating in a practically corrupt system. But (unless I'm mistaken)the rest of the health-care bill is about revising the system, allowing for more competition, right? Isn't that what the rest of the Health-care bill is about, revising that same system that you're saying needs revising? Or am I mistaken?
I'm not sure what you're asking.
(I'm asking) Are they not planning to remove the anti-trust exemption in this new health-care bill?
It's in the House bill, I believe, but so far, has not been added to the Senate bill. So it's up in the air.
So that reform is on its way, making its way through the legislative process? And if so, coupled with increased competition via non-profit insurance programs…it sounds like we might be on the cusp of substantial health-care reform?
Which brings me back to my original question from yesterday, what are we protesting/disagreeing with here on your blog? Including how it relates to this discussion…
There's no guarantee that makes it in. For one, will Ben Nelson, the insurance industry executive, vote for it to be added in amendment?
More to the point, the anti-trust issue is indeed important, but nobody I've read said it will solve the problem of competition.
Please explain about Blue Cross. I understand that many state BlueCross/BlueShield non-profit insurers have converted to into national for-profit company WellPoint. In New York, Empire Blue Cross - Blue Shield is still known by the same name, but converted in 2003.
A fair number of Blues have indeed become for-profit companies. But a lot of them are still in fact non-profits, but operate in the same ways.
Non-profit just means no shareholders and no profit, it doesn't mean no extravagant executive pay, for example.
The insurance industry is back at it. They are saying the Nelson amendment will be a de facto ban on abortion. Check out this story that was forwarded to me from Insdie Health Policy (what is that, I've never even heard of it):
As abortion debate heads to Senate floor
Insurance Source Says Nelson-Hatch Amendment De Facto Ban On Medical Procedure
A key insurance industry source says the abortion amendment sponsored by Sens. Ben Nelson (D-NE) and Orrin Hatch (R-UT) expected to be debated in the Senate Tuesday would act as a de facto ban on the medical procedure. Insurers would essentially stop offering coverage if the language were accepted, the source says.
Currently, many employer-sponsored plans offer abortion coverage as part of their overall package, but if an employer moves into the exchange that would no longer be possible if the amendment passes, the source adds.
The Nelson-Hatch amendment essentially mirrors the Stupak language passed by the House and would bar federal funding of abortion unless it is due to rape, incest or the life of the mother per the long-standing Hyde amendment. The policy would apply to any public plan offered in the exchange as well as private plans receiving subsidies.
The bill would allow individuals to purchase with their private dollars supplemental plans that would cover abortion. But the industry source that while certain states sell so-called “rider” policies that cover abortion, which would be allowed under the Nelson-Hatch amendment, “nobody buys them.”
The U.S. Conference of Catholic Bishops applauded the amendment, saying it “simply corrects [the Senate health reform bill's] grave departures from current federal policy.”
The bishops complain the Senate reform bill “allows the HHS Secretary to mandate abortion coverage throughout the government-run 'community health insurance option.'”)Plus, the say the reform bill “provides funding for other plans that cover unlimited abortions, and creates an unprecedented mandatory 'abortion surcharge' in such plans that will require pro-life purchasers to pay directly and explicitly for other people’s abortions. The bill does not maintain essential nondiscrimination protections for providers who decline involvement in abortion.”
Other religious interests expressed a different opinion. “We know that the U.S. bishops aim to restrict healthcare for women by refusing access to abortion, in vitro fertilization, contraception and embryonic stem cell research and continuing to disrespect advance medical directives,” Jon O' Brien of Catholics for Choice said in a statement. “They do not represent the views of the vast majority of Catholics. In fact, the majority of Catholics do not want their bishops to be involved in this political issue at all.
Meanwhile, both the National Right to Life Campaign and Planned Parenthood announced their intentions to “score” tomorrow's vote. For Planned Parenthood, “a no vote on the Nelson-Hatch amendment will be considered a vote in support of women’s health,” the pro-life group wrote in an e-mail blast to senators today.
For NRLC, a yes vote “can only be construed as a position-defining vote in favor of establishing a federal government program that will directly fund abortion on demand, and a second federal program that will provide government subsidies to private insurance plans that cover abortion on demand,” according to the group.
Nelson, a key centrist Democrat, has repeatedly stated that he would not vote for cloture on reform legislation that does not bar abortion coverage per his language. However, Washington insiders believe it is highly unlikely the Nelson-Hatch bill could garner the 60 votes needed to pass.
In addition to Nelson and Hatch, the measure is cosponsored by Sens. Robert Casey (D-PA), Sam Brownback (R-KS), John Thune (R-SD), Mike Enzi (R-WY) Tom Coburn (R-OK), Mike Johanns (R-NE), David Vitter (R-LA), and John Barrasso (R-WY).
Nelson has said that would be open to compromise language on the issue that would achieve his goal.
While there may be 138 insurance companies nationwide, they cannot operate in every state. State insurance boards limit the number of insurance companies. In Texas, only 16 insurance companies can offer health insurance. I worked for a large company in Indiana. When I transferred to a new location in North Carolina, I had to accept a new plan. The local NC plan was more expensive and restrictive. Why? State Regulation.