Thursday, October 29, 2009

How about an interim public option?

One of the objections insurance companies lob against the Public Option idea for health care reform is that it would be unfair for them to have to compete with a government-run program that would, theoretically, be able to operate at a loss.

At the same time, one of the objections they have against the "mandate," the requirement for most people to buy insurance, is that the penalties for refusing to do so aren't enough to prevent young and healthy people from simply paying the penalty unless/until they get sick, and then choosing to buy insurance, on the understanding that the penalty, as currently included in the legislation, would be lower than the price of premiums.

I have a suggestion that is meant to address both concerns: an "interim" public option.
  1. Under this plan, insurance companies would still be forbidden from denying coverage for pre-existing conditions and from dropping coverage.
  2. However, the insurance company may make a determination that a pre-existing condition exists in someone who applies for insurance and who has not had insurance for a given period of time, say, a year.
  3. If the insurance company makes such a determination, it could refer that person to an "interim" public plan.
  4. Under this interim plan, the applicant for insurance will pay premiums to the insurance company he/she (the applicant) applies for, for a period of, say, 6 months or a year, but all medical coverage during that time will be provided under a government run plan.
  5. After the term is up, the insurance company will have to cover the applicant
  6. The government-run plan would be funded chiefly by payments from the penalties that are charged for not buying insurance.
  7. The public option, in this case, would exist only for those in this interim period.
The advantages to this plan:
  1. It answers the insurance companies' objection to the "free-rider" problem of people not buying insurance when they are healthy. (Their objection is based on the notion that healthy people do not need as many services, and they therefore fund the services required by the less healthy people.)
  2. It lets the insurance companies get some advanced payments in the forms of premiums that are paid while the insured is covered under the interim plan.
  3. It creates an incentive for the government to match its penalties with the cost of caring for people during this interim period.
Disadvantages and possible objections to this plan:
  1. It is, in effect, a huge subsidy to the insurance industry. In the best of worlds, I would prefer some sort of modified single payer system, although I'm sure others would agree. But as it is, it's necessary to deal with the powers that be.
  2. It must be balanced out by effective and enforceable regulations of insurance companies.
  3. By itself, the plan, at least as I have outlined it, has no provision to help those who can afford no insurance. (Hopefully, the expansion of Medicaid, as provided by the Baucus Bill, would help this.)
  4. It doesn't answer a possible objection to this entire plan (and a further objection along the lines of #3), an objection I have not heard others raise but that nags at me: would doctors be required to accept certain insurance or interim public option payments? If so, how would that be enforced? As I understand, for example, very few doctors accept Medicaid: would this problem continue for an interim plan?

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