Homestretch 4 - The Exchange, public option and CO-OPs

[This is the fourth in a series of six articles summarizing the leading categories of issues at stake in the final stages -- the homestretch -- of the debate on national health insurance and health care reform.]

55% of Americans who favor a government insurance plan and health reform advocates are rejoicing over yesterday’s news from Senate Majority Leader Harry Reid (D, NV). Yesterday, Reid stated that the bill he intends to send to the Senate floor next month will include a "public option" – a federal government created insurance plan offered to Americans who do not get medical coverage through their employers -- with the condition that states could opt out of the program. Reid’s move is being hailed as a bold and vital move by health reform supporters throughout the country and a major milestone for health insurance reform as it moves forward in both houses. This is not to say that Reid’s model of the public option is a definite or that amendments will not attempt to eliminate or alter the public option in the Senate bill.  

Majority Leader Reid and House Speaker Nancy Pelosi (D-San Francisco) are advancing separate healthcare bills, each containing different provisions for the public option. House Democrats may have the support to pass a bill that would create a nationwide government plan without any option for states not to offer the plan; however Speaker Pelosi has stated that the opt-out alternative could be included in a reconciled bill. Both the Senate bill and the House bill will need to be reconciled later this year before final legislation could be sent to the White House for President Obama's signature.

All three of the current versions of the bill in Congress (Senate HELP, Senate Finance and the House Tri-committee bill--H.R. 3200) include a health insurance Exchange, which would serve as the marketplace for qualified plans that follow new insurance provisions. The Exchange would create a competitive marketplace that offered choices of plans, which would have to follow a common set of regulations. The Exchange has several advantages including choice, price competition and portability if you choose to change jobs. In all three proposals, the Exchange would be a place where individuals without access to employer-sponsored coverage could purchase insurance. Small employers could also purchase plans for their employees through the Exchange. In both the Senate Finance bill and H.R. 3200, eligibility for employers would be phased in starting with smaller employers. 

Conservative Democrats and some Republicans supported a Consumer Operated and Oriented Plan (CO-OPs) program. The Senate Finance bill included a CO-OP program, which would encourage the creation of non-profit health insurance companies run by the members. Members would be required to use the profits to lower premiums, improve benefits or improve the quality of the care consumers receive. In order to be included in the Exchange, CO-OPs would have to follow the same regulations as the private plans. Many health reform advocates maintain that CO-OPs have failed in the past and will fail this time too. Additionally, the Congressional Budget Office does not find significant savings in the CO-OP model, whereas it does with the public option planSenate Finance Committee Chairman Baucus has said that he chose to include the CO-OP over the public option in the Finance bill because he felt it would garner greater support, but he is still open to the public option

Despite the disagreement among policy makers regarding the potential success of CO-OPs, much of the debate has now turned to the
public option.  With Reid’s announcement, the question seems to have become not if there will be a public option, but what form the public option will take. Reid’s opt-out model allows states to withdraw from the public plan in 2014, a year after the public plan goes into effect. Senator Olympia Snowe (R-ME), the only Republican on the Senate Finance committee to vote for the Finance committee version of the bill, supports the “trigger” model of the public option. The trigger would only put a public option into effect in states that do not meet standards of affordability. Snowe stated yesterday that she was disappointed with Reid’s decision to go with the opt-out model over the trigger model.   

The Insurance industry has released a report which argues that the public option will raise costs to those people with private insurance plans, in order to offset the reduced cost of the public plan. In fact, public health insurance actually costs less than private insurance. However, the public option as proposed by Reid would be offered through the Exchange, which would only be available to those individuals without employer sponsored insurance. And only a fraction of people would choose the public option, according to the Congressional Budget Office. Moreover, the Exchange would serve as a regulator of benefit plans, and Reid’s proposal also requires the government plan to negotiate provider rates, instead of relying on Medicare rates, which are often lower than private reimbursement rates. 

Congress must produce a bill that creates competition in the health insurance market, in order to successfully lower costs and provide quality choices to consumers. A majority of Americans, policy makers and advocates see the public option as the best way of doing this. H.R. 3200 and Reid’s proposal can achieve this but we cannot lose focus on the overall goal of passing health insurance reform this year. If an opt-out or trigger can create competition while lowering costs and providing quality care, then they should be considered to keep the momentum going. The ultimate goal is quality affordable health insurance for all Americans.

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