A public health insurance option ( public insurance option or public option for short) is a proposed health insurance plan that would be offered by the U.S. federal government. In Affordable Health Care for America Act (H.R. 3962), and its predecessor H.R. 3200, it will be a Qualified Health Benefit Plan competing with similar private insurance plans in an internet based exchange or market place, enabling citizens and small businesses to purchase health insurance meeting the minimum federal standard. Persons covered by other employer schemes or by state insurance plans such as Medicare will not eligible to obtain coverage from the exchange and therefore cannot obtain this form of federal health insurance. The federal government's health insurance plan will be financed entirely by premiums without subsidy from the Federal government. The plans stated in the Senate HLP Committee and H.R. 3962, the two that contain clauses establishing a public insurance option, require the repayment of "seed money" to the Treasury over a ten year period.
President Barack Obama promoted the idea while running for election. Since becoming President, Obama has downplayed the need for a public health insurance option including calling it a "sliver" of health care reform, but has still not given up pursuing the idea. Congressional Democrats have tended to support this idea, stating that it would drive down premiums and provide choice where few options exist. Congressional Republicans have tended to oppose the idea, stating that it would cause the private health insurance industry to collapse. Since the public option in H.R. 3962 would initially keep rates for services between Medicare and most private insurers, private insurers have complained that this will result in cost-shifting to them.
Rationale
See also: Health care reform debate in the United StatesSupporters of a public plan, such as Washington Post columnist E.J. Dionne, argue that many places in the United States have monopolies in which one company, or a small set of companies, control the local market for health insurance. A government run plan would thus create new competition. Dionne has labeled a public option a "monopoly-buster". He has also stated those opposed to a government plan know public opinion is against them and are resisting it by trying to move discourse towards abstract and demagogic ground. He has referred to Sen. Grassley's calling government a "predator" (see below) as a "most revealing" example of this.
Nobel Laureate economist and New York Times columnist Paul Krugman has stated that local insurance monopolies exist in many of the smaller states represented by "balking" Democrats, and that those who oppose the idea of a public insurance plan on the grounds of defending private competition are in practice just defending lucrative local monopolies. He also stated that traditional ideas of beneficial market competition do not apply to the insurance industry given that insurers mainly compete by risk selection. He wrote, "The most successful companies are those that do the best job of denying coverage to those who need it most." Krugman also said in 2007 that a single payer system would be the most efficient and cheapest solution and a public insurance option would get the country towards single payer as through competition it would drive the private insurers out of business.
According to economist and former US Secretary of Labor, Robert Reich, only a "big, national, public option" can force insurance companies to cooperate, share information, and reduce costs. Scattered, localized, "insurance cooperatives" are too small to do that and are "designed to fail" by the moneyed forces opposing Democratic health care reform.
In a public rally in Cincinnati, on September 7, 2009, President Barack Obama said: "I continue to believe that a public option within the basket of insurance choices would help improve quality and bring down costs."
Democratic Representative Sheila Jackson-Lee, who represents the 18th congressional district in Houston, has said, "Surveys show that nearly three out of four voters want a public health insurance plan." She also has said that "73 percent of doctors and 1,000 state legislators favor health reform legislation with a public option. The American people want a strong public option heard in Congress... because their voices have been drowned out by insurance company propaganda and disruptive tea-baggers at health reform town hall meetings."
President Obama elaborated on his reasons for a public plan in his seminal September 9th address to the Joint Session of Congress:
I have no interest in putting insurance companies out of business... the insurance companies and their allies don't like this idea. They argue that these private companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. I've insisted that like any private insurance company, the public insurance option would have to be self-sufficient and rely on the premiums it collects. But by avoiding some of the overhead that gets eaten up at private companies by profits and excessive administrative costs and executive salaries, it could provide a good deal for consumers, and would also keep pressure on private insurers to keep their policies affordable and treat their customers betterAlternative plans
See also: Single-payer health care#Proposals for a single-payer system in the United StatesAn alternative that has been proposed is to pump federal money into various private non-profit health insurance cooperatives (co-ops) to get them to become large and established enough to provide cost savings and into setting up transparent health insurance exchanges that would host them among health insurers. These co-ops would likely be statewide. Howard Dean and other Democrats have been critical of abandoning a public option in favor of co-ops, questioning whether the co-ops would have enough negotiating power to compete with private health insurers. Prominent economists such as Robert Reich and 2008 Nobel Economics Laureate Paul Krugman have also questioned co-ops ability to become large enough to reduce health care costs significantly and thus support the public option instead.
Those desiring reform beyond the public health insurance option have argued for a single-payer system, which is planned to be brought for a vote. A single-payer system has been claimed by some as politically difficult, and Barack Obama has come out against it, stating in a joint session of Congress, "...it makes more sense to build on what works and fix what doesn't, rather than try to build an entirely new system from scratch." Obama had expressed that he is a proponent of a single payer universal health care program during an AFL-CIO conference in 2003.
Instead of creating a network of statewide public plans, Senator Olympia Snowe has proposed a "trigger" in which a plan would be put into place at some point in the future in states that do not have more than a certain number of private insurance competitors. Senator Tom Carper has proposed an "opt-in" system in which state governments choose for themselves whether or not to institute a public plan. Senator Chuck Schumer has proposed an "opt-out" system in which state governments would initially be part of the network but could choose to avoid offering a public plan.
Criticism
See also: Health care reform debate in the United StatesMichael F. Cannon, a senior fellow of the CATO Institute, has argued that the federal government can hide inefficiencies in its administration and draw away consumers from private insurance even if the government offers an inferior product. Cannon referred to a study by the Congressional Budget Office that found that profits account for less than 3% of private health insurance premiums, and he commented that the lack of a profit motive reduces incentives to eliminate wasteful administrative costs. The chief executive of Aetna, Ron Williams, has stated on the News Hour with Jim Lehrer that a public option creates a situation where "you have in essence a player in the industry who is a participant in the market, but also is a regulator and a referee in the game". He said, "we think that those two roles really don't work well."
Senator Charles Grassley, an opponent of the public insurance option, was asked for his opinion of Medicare, a much more government controlled entity than the public insurance plan. Grassley stated that Medicare was "part of the social fabric of America", but he went on to say that "I think there is a lot wrong with it". Later in the same exchange he said “the government is not a fair competitor. It's a predator” which E. J. Dionne sees as deliberate misdirection on Grassley's part (in Rationale above).
Dr. Robert E. Moffit of the Heritage Foundation has argued that a public plan in competition in private plans would likely be used as a "dumping ground" for families and individuals with higher than average health risks. This, in his view, would lead to costs that business should pay passed onto the taxpayer. Republican House Minority Whip Eric Cantor has argued that a public plan would compete unfairly with private insurers and drive many of them out of business.
John Murphy, an independent candidate for Congress from the 16th District of Pennsylvania in 2006 and 2008, has called the current public option plan "a de facto bailout of the healthcare insurance companies" pointing out that "Here we have a health care bill (H.R. 3962) which will not only drive up insurance co
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