Is this the solution to Obamacare's woes?
President Barack Obama wants one. Democratic presidential candidate Hillary Clinton wants one. Democratic Sens. Jeff Merkley of Oregon, Chuck Schumer of New York, independent Bernie Sanders of Vermont and dozens of their progressive colleagues want one. So does the insurance commissioner of California.
What do all these powerful politicians want? A “public option.”
Another name for a government-run health insurance program, the public option is making a comeback. After being dropped from the Affordable Care Act debate back in 2010, talk of a public option largely disappeared. Until now.
The subject came up again, strongly, during the presidential primary campaigns when Sanders called for a single-payer, government-administered health care program as part of his bid for the Democratic nomination. In April, Democratic presidential nominee Hillary Clinton proposed the idea of a public option insurance plan in every state and expanding Medicare to people age 55 and older.
In July, President Obama called for another look at a public option in response to major insurers dramatically decreasing their presence in the ACA exchanges. Just afterward, Aetna (AET) joined UnitedHealth (UNH), Humana (HUM) and others in announcing that it too would pull out of the majority of its exchange business.
This opened the door for public option advocates.
They point to the fact that patients in many areas of the country now have only one or two insurer choices in their exchanges. A government alternative, they argue, would increase competition, keep premium costs affordable and make sure everyone has coverage.
“At a time when 29 million people are still uninsured, and 31 million are underinsured, we must continue to make needed health care reforms so that the American people can have health care as a right, not a privilege,” Sanders said in a statement.
Earlier this month, Sanders joined Sens. Merkley; Schumer; Patty Murray, D-Washington; Dick Durbin, D-Illinois; and 22 other democratic co-sponsors to introduce a Senate resolution calling for a public option in the health insurance market. At the same time, the Progressive Change Campaign Committee, head of an activist coalition including MoveOn.org, Working Families and the AFL-CIO, launched a grassroots effort to get voters to support the resolution.
Reaction from the insurance industry was quick. On Sept. 16, the same day Merkely announced the resolution, the health insurers lobby group, America’s Health Insurance Plans (AHIP), sent an email to members asking them to “reach out to your contacts in Senate offices and urge them to oppose a resolution that expresses…that every American should have access to a public option.”
The memo also said: “A public option would not do anything to address the challenges in the Exchanges. Instead, we need to address underlying health care costs that are making health coverage more expensive.”
A statement attached in the email went on to explain the solutions that AHIP is calling for to stabilize the exchanges, including improving verification of special enrollment periods and strengthening risk-adjustment programs.
Other critics of a public option worry that a government-sponsored alternative would limit competition, not increase it. The thinking goes that few private insurers would want to compete with a government-sponsored plan that would not be subject to the same profit, cost and shareholder restraints as private insurers.
Also this month, California Insurance Commissioner Dave Jones announced his support for a state-sponsored public option. The news was surprising because Covered California is considered one of the strongest and most competitive state exchange systems. It remains to be seen how a state-sponsored public option would work.
Big insurers aren’t the only health care players that public option advocates are trying to tame. “There has been enormous consolidation on the provider side, particularly hospitals, that allow them to command much higher rates,” said Jacob Hacker, director of the Institution for Social and Policy Studies and professor at Yale University, who is often called the father of the public option.
“It’s a bit of an arms race between insurers and providers,” said Hacker. “The only way insurers have been able to deal with consolidation so far is to narrow networks and pass costs on to consumers.”
How likely would it be for Congress to approve any type of federal public option and make it a reality? “It’s going to be really hard,” Hacker said. “It will take a concerted push from a president and a congressional majority to make it happen. That said, I think it’s realistic.”