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Thread: CBO: Public option premiums higher than private plans

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    CBO: Public option premiums higher than private plans

    The public insurance option would typically charge higher premiums than private plans available in the exchange, according to the Congressional Budget Office analysis of the House bill.

    That surprising conclusion raises doubts about Democratic promises that a government-run insurance plan would provide a lower-cost alternative to consumers.

    ...

    That estimate of enrollment reflects CBO’s assessment that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees. (The effects of that “adverse selection” on the public plan’s premiums would be only partially offset by the “risk adjustment” procedures that would apply to all plans operating in the exchanges.)
    CBO: Public option premiums higher than private plans - Live Pulse - POLITICO.com

    There's a much-needed dose of reality. If you peruse any of the articles at places like dailykos, there are hundreds of comments saying things like "insurance is so expensive nowadays, I need a public option so I can afford to get coverage!"
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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by RightinNYC View Post
    CBO: Public option premiums higher than private plans - Live Pulse - POLITICO.com

    There's a much-needed dose of reality. If you peruse any of the articles at places like dailykos, there are hundreds of comments saying things like "insurance is so expensive nowadays, I need a public option so I can afford to get coverage!"
    Would it still give an option to those with pre-existing conditions, while not competing private plans out of existence? I might almost approve of that type public option.
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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by Redress View Post
    Would it still give an option to those with pre-existing conditions, while not competing private plans out of existence? I might almost approve of that type public option.
    I believe (and I might be wrong) that the reform proposals already contain a clause that already requires private companies to give insurance to people with pre-existing conditions.

    The CBO analysis also notes that only 6 million people would sign up for the public option.
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    Re: CBO: Public option premiums higher than private plans

    I cant wait to see how the clowns in congress spin this one. Correct me if Im wrong wasnt the whole reason for this "plan" was to keep costs down?
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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by RightinNYC View Post
    CBO: Public option premiums higher than private plans - Live Pulse - POLITICO.com

    There's a much-needed dose of reality. If you peruse any of the articles at places like dailykos, there are hundreds of comments saying things like "insurance is so expensive nowadays, I need a public option so I can afford to get coverage!"

    What !? I have to read this ... thx for posting.

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    Re: CBO: Public option premiums higher than private plans

    This is going to give Wyden some running room for his choices amendment.

    Also, the more robust plan did have lower premiums, IIRC.
    I'm not happy about this!

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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by jackalope View Post
    What !? I have to read this ... thx for posting.
    Quote Originally Posted by jackalope View Post
    This is going to give Wyden some running room for his choices amendment.

    Also, the more robust plan did have lower premiums, IIRC.
    I'm not happy about this!
    I was surprised by this, although I feel like I shouldn't be. I mean, when you think about it, it seems quite likely that a public plan would have higher premiums than a private plan - everyone who is very healthy (and thus low cost to insurers, resulting in low premiums) would stick with their plans, while those who are unhealthy (and thus high cost to insurers, resulting in high premiums) would shift to the public plan. They might find some administrative efficiencies, but not enough to make up for that fact.

    This was the reason why I've always assumed that any public plan would end up being heavily subsidized by the federal government, regardless of what they promise when they pass it. Imagine a scenario where Congress enacts a public option open to anyone, everyone who says they can't afford their private insurance is giddy about making the change, and then they find out that the public option premiums would be higher than private options. There would be mass public outrage, which would lead to proposals to increase federal subsidies which would almost certainly pass under the guise of "creating competition."

    Looking at it from that perspective, I don't see how a public option, robust or not, would result in lower premiums. That's not to say it wouldn't improve health care access for some people, but nothing comes for free.
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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by RightinNYC View Post
    I was surprised by this, although I feel like I shouldn't be. I mean, when you think about it, it seems quite likely that a public plan would have higher premiums than a private plan - everyone who is very healthy (and thus low cost to insurers, resulting in low premiums) would stick with their plans, while those who are unhealthy (and thus high cost to insurers, resulting in high premiums) would shift to the public plan. They might find some administrative efficiencies, but not enough to make up for that fact.

    This was the reason why I've always assumed that any public plan would end up being heavily subsidized by the federal government, regardless of what they promise when they pass it. Imagine a scenario where Congress enacts a public option open to anyone, everyone who says they can't afford their private insurance is giddy about making the change, and then they find out that the public option premiums would be higher than private options. There would be mass public outrage, which would lead to proposals to increase federal subsidies which would almost certainly pass under the guise of "creating competition."

    Looking at it from that perspective, I don't see how a public option, robust or not, would result in lower premiums. That's not to say it wouldn't improve health care access for some people, but nothing comes for free.


    Wyden makes a strong argument that access to the exchanges and public plan must be widened, or you run the risk of sicker people being over-represented.

    I am wicked surprised by the results too, especially since the major selling point is lower premiums. (Although, if they are going by national averages, it will still be lower for us!) I don't expect we'll qualify for any subsidies, but if we can pay the national average instead of what we pay now - we will save thousands of dollars.


    The subsidies will be for any plan though (I think they're calling them 'affordability credits'), they are premium subsidies, and not plan subsidies. If that makes sense?
    Last edited by jackalope; 10-30-09 at 12:23 AM.

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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by jackalope View Post
    Wyden makes a strong argument that access to the exchanges and public plan must be widened, or you run the risk of sicker people being over-represented.

    I am wicked surprised by the results too, especially since the major selling point is lower premiums. (Although, if they are going by national averages, it will still be lower for us!) I don't expect we'll qualify for any subsidies, but if we can pay the national average instead of what we pay now - we will save thousands of dollars.
    Couldn't that problem be largely resolved by removing the rules forbidding insurance companies from competing across state lines? If every insurer could compete nationwide, it seems reasonable to assume that costs would largely fall into line across the country.

    The subsidies will be for any plan though (I think they're calling them 'affordability credits'), they are premium subsidies, and not plan subsidies. If that makes sense?
    That does make sense. Do you know if the premiums will be equivalent regardless of where you apply them? Or is it one of those "$500 credit toward purchase of a public plan or $250 toward purchase elsewhere" type things?
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    Re: CBO: Public option premiums higher than private plans

    Quote Originally Posted by RightinNYC View Post
    I was surprised by this, although I feel like I shouldn't be. I mean, when you think about it, it seems quite likely that a public plan would have higher premiums than a private plan - everyone who is very healthy (and thus low cost to insurers, resulting in low premiums) would stick with their plans, while those who are unhealthy (and thus high cost to insurers, resulting in high premiums) would shift to the public plan. They might find some administrative efficiencies, but not enough to make up for that fact.

    This was the reason why I've always assumed that any public plan would end up being heavily subsidized by the federal government, regardless of what they promise when they pass it. Imagine a scenario where Congress enacts a public option open to anyone, everyone who says they can't afford their private insurance is giddy about making the change, and then they find out that the public option premiums would be higher than private options. There would be mass public outrage, which would lead to proposals to increase federal subsidies which would almost certainly pass under the guise of "creating competition."

    Looking at it from that perspective, I don't see how a public option, robust or not, would result in lower premiums. That's not to say it wouldn't improve health care access for some people, but nothing comes for free.
    and the cost of covering the presently uninsured.
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