This Week in Health Insurance Reform

This week -- probably starting tomorrow (Tuesday) -- the Senate Finance Committee will be taking up proposed amendments that would create a public option. Currently, the Finance Committee draft (called a "mark," in case you see that word used in press and don't know what it means) calls for nonprofit co-ops that would be member owned, like utility co-ops that exist in several places in the country, or like food co-ops, that are more common.

Here's the problem. Everybody (or most everybody) agrees that insurance companies need an incentive to decrease premium prices and to stop increasing them at a rate faster than the rate of inflation. Our small group insurance has increased over 100% in the past four years. The average rate-hike over the past year was just under 6%, but Anthem Blue Cross in Connecticut just tried to increase individual rates up to 30% -- the state made them decrease to "only" 20%, which is still ridiculous. If health care reform is going to work -- and if subsidies for the middle class aren't going to increase by at least 6% every year -- there needs to be some mechanism for controlling premium prices.

There are two basic public option proposals. Both of them would create a publicly run plan that would stand beside all of the commercial insurance plans as an option for people who are uninsured. Because the administrative costs of a public option are expected to be far lower than the administrative costs of private plans, it is anticipated that the public option would create competition with private plans, thereby driving down premium costs.

The two public option proposals are very similar. One would set provider reimbursement rates at Medicare plus 5%; the other would have the plan negotiate reimbursement rates (the rate at which the insurance plan pays the doctor, hospital, labs, imaging vendors, etc.). The Medicare plus 5% option saves $85 billion more than the negotiated rate option, which saves about $25 billion over not having any public option.

There is a third public option proposal known as "public option with a trigger," favored by moderate Republican Olympia Snowe. This option, which may or may not be debated by the Finance Committee, would create a public option that would not be invoked unless private insurers weren't offering "affordable" plans, with "affordable" most likely being defined as a percentage of gross income of the middle class -- somewhere around 10-12% of income.

So why do people oppose a public option? They believe it's the first step towards "socialized medicine." The theory is that people will quit their current plan, and employers will stop offering insurance, and people will flock to the public option, so the public option will grow until it's the largest plan around. Personally, I suspect there will be some of that, but people (like me) are scared to death of changing their health insurance if what they have is good, so I think there will be less of this than the critics thing. But still, it's probably true that the public option will grow over time.

I just don't have a problem with that. If Medicare -- the public plan for the elderly and disabled -- is good enough for them, then why can't the rest of us have a public plan, too? Yes, it grows government. But if it really does create long lines or less efficiency, then people will flock back to the private insurance options. As long as there's choice, I fail to see the problem.

As for the trigger, liberals don't trust triggers to be pulled. There's a trigger in Medicare Part D (drug benefit) that should have been pulled a long time ago, but hasn't been. So, the argument goes, a public option with a trigger is really no public option at all. Conservatives oppose any form of public option, including one with a trigger, for the reasons already stated above.

The issue with the reimbursement rates are pretty much the same. Conservatives want the public option to have to compete with private insurance, and that means they have to negotiate rates the same as private insurance companies. Seems to me that saving an additional $85 billion is more important. But I don't have a strong feeling about this piece of it.

And that's what you can expect to be hearing about this week.

There's one other option that I think you'll hear about -- choice for all, meaning even employees of large companies that provide insurance for their employees will have the right to switch plans. The current Finance Committee proposal only puts individuals and small employers in the "exchange," where they can shop for a plan. Congressman Ron Wyden and others want everybody to have a choice. That may come up this week, too.

Meanwhile, the two Senate drafts are already being consolidated. Of course, that process can't be finalized until the Finance Committee passes whatever it ends up with, but the leadership is starting to look at ways to combine the two -- one with a public option and one presumably (for the moment) without it.

That's where we are today. I'll continue to update you as best I can. Jennifer