This month, three leading Democrats signaled where they’d like to take the U.S. health care system in the post-Obama era — and that’s back to the future.
President Obama called for a “public option” — that is, an insurance plan wholly run by the government — after he leaves office. “Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited,” he wrote in the Journal of the American Medical Association.
Hillary Clinton is on board with the public option, too — no doubt as part of her effort to secure the endorsement of Sen. Bernie Sanders, an avowed proponent of government-run, single-payer health care. Sanders called Clinton’s embrace of a public option “an important step forward.”
Democrats have already rejected a public option once. The idea isn’t any better, six years later.
In order to get the votes to pass ObamaCare, Senate Democrats had to cut the public option from the final version of the bill — much to the chagrin of then-Speaker Nancy Pelosi and the rest of the House Democratic caucus. As a compromise, the legislation included a provision that would create and fund state-run, nonprofit insurance “co-ops.”
These entities were to provide government-backed competition to conventional insurers. And because they were to be run for the mutual benefit of their members — without the need to deliver returns to their investors — they were supposed to be able to offer affordable premiums.
The Obama administration said that these co-ops would provide the same benefits as the public option. In 2009, Kathleen Sebelius, then the secretary of the Department of Health and Human Services, told Bloomberg, “You could theoretically design a co-op plan that had the same attributes as a public plan.” Shortly afterward, President Obama said to Time magazine that the co-ops could serve the same purpose as a public option.
Fast-forward seven years, and the co-ops are an abysmal failure. Of the 23 created by ObamaCare, 16 have closed or are in the process of shutting down. They’ve wasted $1.7 billion in federal loans — and forced hundreds of thousands of people to find new insurance coverage.
In effect, Obama, Clinton and Sanders are now calling for a new public option to replace the co-ops — which, of course, were supposed to work just like a public option.
It’s true that competition in ObamaCare’s exchanges is far from robust. According to the president, “in 34 states, 75% of the insurance market is controlled by five or fewer companies.” The demise of the co-ops has only eroded competition further.
But that lack of competition isn’t a function of greedy insurers doing everything they can to force out competitors. The exchange markets are uncompetitive because Obamacare’s myriad rules and coverage mandates have made it difficult for insurers to offer affordable coverage — or even remain solvent.
Over the past three years, insurer Ambetter has had to nearly quadruple the deductible on one of its mid-level silver exchange plans, from $1,750 to $6,500, in order to keep premiums low enough to attract customers.
UnitedHealthcare, the country’s largest insurer, recently announced that it would pull out of more than three-quarters of the exchanges it participated in this year. It expects to lose $650 million on its exchange business by the end of this year.
Blue Cross Blue Shield of Illinois’s parent company lost $1.5 billion on exchange plans last year.
A McKinsey report estimated that insurers collectively lost $2.7 billion on the exchanges in 2014, the most recent year for which data are available.
A public option won’t suddenly make the exchanges profitable for private insurers. In fact, it could hasten their exit from the marketplaces. A government-run insurer with theoretically bottomless pockets and no mandate to make money could underprice every other insurer — and eliminate competition within the exchanges altogether.
Maybe that’s why Sanders endorsed Clinton soon after she came out in favor of a public option. It is “an important step forward” — toward a single-payer system.
How Hillary Plans To Triple Down On ObamaCare’s Failures
Sally C. Pipes
This month, three leading Democrats signaled where they’d like to take the U.S. health care system in the post-Obama era — and that’s back to the future.
President Obama called for a “public option” — that is, an insurance plan wholly run by the government — after he leaves office. “Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited,” he wrote in the Journal of the American Medical Association.
Hillary Clinton is on board with the public option, too — no doubt as part of her effort to secure the endorsement of Sen. Bernie Sanders, an avowed proponent of government-run, single-payer health care. Sanders called Clinton’s embrace of a public option “an important step forward.”
Democrats have already rejected a public option once. The idea isn’t any better, six years later.
In order to get the votes to pass ObamaCare, Senate Democrats had to cut the public option from the final version of the bill — much to the chagrin of then-Speaker Nancy Pelosi and the rest of the House Democratic caucus. As a compromise, the legislation included a provision that would create and fund state-run, nonprofit insurance “co-ops.”
These entities were to provide government-backed competition to conventional insurers. And because they were to be run for the mutual benefit of their members — without the need to deliver returns to their investors — they were supposed to be able to offer affordable premiums.
The Obama administration said that these co-ops would provide the same benefits as the public option. In 2009, Kathleen Sebelius, then the secretary of the Department of Health and Human Services, told Bloomberg, “You could theoretically design a co-op plan that had the same attributes as a public plan.” Shortly afterward, President Obama said to Time magazine that the co-ops could serve the same purpose as a public option.
Fast-forward seven years, and the co-ops are an abysmal failure. Of the 23 created by ObamaCare, 16 have closed or are in the process of shutting down. They’ve wasted $1.7 billion in federal loans — and forced hundreds of thousands of people to find new insurance coverage.
In effect, Obama, Clinton and Sanders are now calling for a new public option to replace the co-ops — which, of course, were supposed to work just like a public option.
It’s true that competition in ObamaCare’s exchanges is far from robust. According to the president, “in 34 states, 75% of the insurance market is controlled by five or fewer companies.” The demise of the co-ops has only eroded competition further.
But that lack of competition isn’t a function of greedy insurers doing everything they can to force out competitors. The exchange markets are uncompetitive because Obamacare’s myriad rules and coverage mandates have made it difficult for insurers to offer affordable coverage — or even remain solvent.
Over the past three years, insurer Ambetter has had to nearly quadruple the deductible on one of its mid-level silver exchange plans, from $1,750 to $6,500, in order to keep premiums low enough to attract customers.
UnitedHealthcare, the country’s largest insurer, recently announced that it would pull out of more than three-quarters of the exchanges it participated in this year. It expects to lose $650 million on its exchange business by the end of this year.
Blue Cross Blue Shield of Illinois’s parent company lost $1.5 billion on exchange plans last year.
A McKinsey report estimated that insurers collectively lost $2.7 billion on the exchanges in 2014, the most recent year for which data are available.
A public option won’t suddenly make the exchanges profitable for private insurers. In fact, it could hasten their exit from the marketplaces. A government-run insurer with theoretically bottomless pockets and no mandate to make money could underprice every other insurer — and eliminate competition within the exchanges altogether.
Maybe that’s why Sanders endorsed Clinton soon after she came out in favor of a public option. It is “an important step forward” — toward a single-payer system.
Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.