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Health Insurance Industry’s $300 Billion Victory Over the Public Option

When Blanche Lincoln (D-AR), Ben Nelson (D-NE), Mary Landrieu (D-LA), Joe Lieberman (I-CT), and the entire Republican Senate caucus stepped up to kill the public option in the Senate, it is important to remember that the health insurance industry won a victory-a victory worth $300 billion. As Jay Rockefeller (D-WV) and Tom Harkin (D-IA) now try to crush attempts to revive the public option inside a reconciliation measure, they are battling to protect that extra $300 billion that will flow to AHIP as a result. The public option was never just a "sliver" as Obama tried to claim. It was about a fundamental moral right and the role of government. But what it was also about was a huge amount of money.

The CBO projects that the relatively weak public option-the one limited just to the exchange in the House health care bill-would secure roughly one-fifth of that market, equal to around 6 million people (PDF). The CBO concluded that, as a result of those 6 million customers, the public option will take in $298 billion (PDF) in direct premiums, exchange subsidies, and risk adjustment payments from 2013-2019. However, with the public option removed, but the individual mandate remaining, that $300 billion will instead go straight to the private insurance corporations' books. If, like I personally suspect, the CBO slightly underestimated the popularity of the public option, and it manages to secure instead roughly a third of the customers on the exchange, that would be roughly $500 billion that the public option would take from the private insurance companies.

I often hear the argument that the public option was not important because only 2% of Americans would be using it. That's true, but it is important to remember that roughly a third are currently insured by public programs such as Medicare, Medicaid, and Tricare. Of course, of the roughly half of Americans with private insurance, the bulk of them get there coverage through employer-provided, self-funded plans. Plans in which the employer bears the risk and holds the premiums. The insurance companies are only subcontracted to provide administrative functions. That 6 million people the public option was projected to cover would be a significant share of the potential market for private insurance companies to actually cover and noticeably expand the amount of money they would have earning float revenue.

It is important to remember the sheer scope of the private insurance companies victory if they stop health care reform from having even a relatively weak public option. It will be a victory that will provide them with an extra $300 billion of our money. No doubt some of that same money will be used in the future to fight efforts to enact real health care reform.

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Jon Walker

Jon Walker is political writer and blogger for FireDogLake. He is an expert on health care policy and the politics of health care reform.

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