Public Option Dumping Ground
The CBO confirms today my long-held suspicion that the vaunted "public option" is not much more than a high-risk pool and forecasts that premiums will actually be slightly higher than private offerings.
Currently, private health insurance is available via the following mechanisms:
1. Large employer group coverage
2. Small group market (small business)
3. Individual market (self-employed, unattached)
Additionally, thirty-four states (give or take) offer a guaranteed issue high-risk pool. For example, in Minnesota:
MCHA was established in 1976 by the Minnesota Legislature to offer policies of individual health insurance to Minnesota residents who have been turned down for health insurance by the private market, due to pre-existing health conditions. MCHA is sometimes referred to as Minnesota’s “high risk pool” for health insurance or health insurance of last resort. Currently, about 30,000 Minnesota residents are insured by MCHA throughout the State of Minnesota.
MCHA is a non-profit Minnesota corporation, organized under Chapter 317 of Minnesota law. MCHA is not a State agency. It is regulated by the Minnesota Department of Commerce. An eleven-member board of directors provides policy direction to MCHA. An executive staff manages the administration of the risk pool. Since its first year of operation in 1977, MCHA has contracted with an outside organization to perform day-to-day operations of the plan.
MCHA IS NOT MINNESOTACARE!
Premiums charged to policyholders are generally higher than rates for comparable policies in the marketplace By law, MCHA premiums must be set between 101% - 125% of the weighted average for comparable policies.
WHO NEEDS MCHA INSURANCE?
Minnesotans who have been turned down for individual health insurance in the private market due to pre-existing conditions.
Minnesota's high-risk pool is one of the better ones, with its regulated caps on premiums. Maryland and New Hampshire also appear reasonable. On the other hand, Iowa and West Virginia offer high-risk pools with far steeper premiums.
Given the limitations on the "public option" offerings currently in legislation (HR 3200/HELP), I have long wondered why any small business would want to associate with what essentially would be the high-risk market, and consequently, if separated from other private plans in the exchange, would likely be more expensive. Today, the CBO confirms:
a public plan is also apt to attract enrollees who, overall, are less healthy than average (for the same reasons it would attract a substantial number of enrollees). Although the payments received by all plans in the exchanges would be adjusted to account for differences in the health of their enrollees, the methods used to make such adjustments are imperfect. As a result, the higher costs of those less healthy enrollees in the public plan would probably be offset partially but not entirely; the rest of the added costs would be reflected in the public plan’s premiums. Correspondingly, the costs and premiums of competing private plans would, on average, be slightly lower than if no public plan was available.
Common sense. I find it odd that the CBO doesn't acknowledge that this represents the status quo. If the private market were to absorb the uninsurable, premiums would increase, hence, the existence of state-level high-risk pools for states that have pursued guaranteed issue in the absence of federal reforms.
In fact, the preceding:
it would add a small amount of competitive pressure in many insurance markets that are currently served by a limited number of private insurers.
is directly in contradiction with the effective outcome. Yes, adding another option would add a "small amount of competitive pressure" simply by increasing the number of available insurers. However, that the premiums for the public option are anticipated to be higher on average than private options at best neutralizes its competitive advantage. The potential for evolving into a dumping ground with ever-increasing premiums is enough for any progressive to stop and ask: Why support any kind of crippled public option?
My view is that a triggered public option open to all is far superior than the restricted options currently written into legislation. Of course, neither is acceptable, but progressives should be aware that advocating for the restricted public option, with the dubious claim that "it will lead to single payer" is a route to adverse selection and eventual failure of the public option concept.