House Democrats Make Another Go At Creating Public Option

Insurance News Net reports:

“A group of 45 Democratic U.S. representatives have revived the idea of creating a government-run health insurance plan in a bill introduced to the House Committee on Energy and Commerce this week. The proposal has already drawn fire from industry trade groups that say it would crowd out private insurers and give consumers fewer options when shopping for health coverage.

The so-called public option health insurance plan was included in initial versions of the Obama administration’s Affordable Care Act health insurance reform legislation but was ultimately scrapped amid Republican complaints that it would amount to a government takeover of health care. In its place, Congress allowed for the creation of health insurance Consumer Operated and Oriented Plans as a way to provide consumers with additional, non-profit coverage options, with the hope that it would increase competition and drive down the cost of health insurance. Earlier this month, Congress froze funding for new CO-OPs (Best’s News Service, Jan. 4, 2013).

The latest effort to create a public option health insurance plan is being led by Rep. Jan Schakowsky, D-Ill., and Rep. Harry Waxman, D-Calif., who say it would reduce health insurance premiums by between 5% and 7%. In a statement, Schakowsky cited a report by the nonpartisan Congressional Budget Office that estimated a public option would decrease the federal budget deficit by $104 billion over 10 years. Schakowsky added she supports the public option because she believes a lower-cost alternative to private insurance would put pressure on private insurers to lower their premiums in order to compete.

“American health consumers deserve a publicly accountable, transparent, and lower-cost option,” Schakowsky said.”The bill we are introducing would provide that choice and lower the federal deficit at the same time. We cannot let for-profit insurance companies continue to prevent American consumers and American taxpayers from benefitting from passage of the public option.”

However, representatives of the health insurance industry said a public option would amount to an expensive new entitlement program at a time when Congress and the White House are deadlocked over how to cut government spending.

Jessica Waltman, senior vice president of government affairs for the National Association of Health Underwriters, said introducing a publicly run health insurance plan into the marketplace would create an unlevel playing field that could ultimately push private health insurers out of the market.

Waltman said the public option bill, HR 261, is unclear about whether the government-run plan would be required to pay state taxes on health insurance premiums.

“Not only would it give the public option plan an unfair advantage over private plans that are subject to state premium taxes, it would be detrimental to state budgets, which receive a great deal of revenue from those taxes,” Waltman said.

She said many states count taxes on health insurance premiums among their top sources of revenue.

“Every time that there are different sets of rules for one type of plan than for other types, it creates adverse selection and significant market upheaval,” Waltman said.

Ryan Young, senior director of federal government affairs for the Independent Insurance Agents and Brokers of America, said his organization views a public option as an expensive proposition that would be far less efficient than private insurers that have been operating in the marketplace for years.

The public option would “inevitably push aside health agents and brokers, along with the rest of the private insurance marketplace, in favor of a costly and inefficient new entitlement program,” Young added. “This is not the path to take to cure our country’s health care or fiscal woes.”

The question of how much it would cost to launch a public option plan will likely be among the chief complaints cited by Republicans who already oppose the idea of the federal government entering the private health insurance market.

Supporters of the public option face an uphill battle in the Republican-controlled House where many members have refused to consider any proposals that would increase government spending.

Earlier this year, Congress just barely avoided major tax increases by agreeing to raise taxes on households making more than $450,000. In exchange, tax breaks were extended for households making less than that amount. In exchange, the White House promised to make significant cuts to entitlement programs to secure the votes of some Republicans (Best’s News Service, Jan. 10, 2013).

Democratic supporters of the public option proposal are also likely to draw fire from House Republicans for the timing of its introduction.

The U.S. Treasury Department has said the nation is likely to bump up against the limit on its borrowing authority by mid-February. Should Congress fail to raise the “debt ceiling,” Treasury Timothy Geithner has said in public statements the country would be unable to pay its creditors and would default on its debts. Geithner has warned that could set off another global recession (Best’s News Service, Jan. 10, 2013).

Meanwhile, Congress must also address automatic spending cuts that will slash government spending by more than $100 billion unless lawmakers come up with a way to keep them from triggering in March. Congress approved the spending cuts, also known as the sequester, during the last battle over whether to raise the debt ceiling in 2011. The automatic cuts were designed to put pressure on Congress to reach an agreement over how to cut government spending.

As part of the “fiscal cliff” tax agreement, Congress pushed the sequester’s implementation deadline back to March 1.

Waltman pointed out public option legislation was also introduced during the last Congress but failed to go anywhere.”