Special Report

We’ve Long Had a Public Option

Non-profits already provide the "public option" Obama says he wants.

By 8.19.09

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President Obama and the far-left in Congress say that a "public option" health insurance plan is necessary because the profit motive results in too much coverage denial, therefore America needs a non-profit option to "keep the insurance companies honest."

In Colorado, Obama explained it this way:

The argument around public option is, should one of the choices -- not the only choice -- but one of the choices on that exchange be a public option? And the idea here would be that a government-run non-for-profit would have its own option that people could sign up for -- they wouldn't have to, but they could sign up for it -- and if it could keep its costs lower and provide a good-quality service and good benefits, then that would help keep the insurance companies honest because the idea being -- the idea being that as a non-for-profit, potentially with lower administrative costs, they could do a good job.

Rebutting concerns that the public option would be a government-subsidized plan, Obama has said repeatedly that it won't be. Rather, it would function as a nonprofit insurer.

He said in Colorado, "a public option can only work if they have to collect premiums just like a private insurer and compete on a level playing field."

If that is true, then there is no need for a public option plan because roughly half of Americans who have private health insurance get it from the same type of entity Obama says he wants to create -- a nonprofit insurer.

According to the same Census report that produced the figure of 46 million uninsured Americans, 202 million of us are covered by private insurance. According to the Alliance for Advancing Nonprofit Health Care, an industry group, "Of the 138 health plans in the United States with at least 100,000 medical enrollees, 84 or 61% are nonprofit." Nearly half -- 48 percent -- of the people covered by the country's 138 largest insurers are enrolled in a non-profit health plan, the Alliance reports. That's 97 million people. That doesn't include those covered by small, non-profit insurers. 

Advocates for left-leaning health care reform like to target the small-group market, meaning the market for small employers, usually defined as businesses with fewer than 100 employees. They often cite a shortage of competition in this market as a reason or the primary reason health care is so expensive and there are so few options. Fingers are usually pointed at big, for-profit insurers. Conveniently ignored are the big non-profits.

The Congressional Budget Office surveyed the small group market in 2005, and reported this finding:

Thirty of the 40 states supplying information identified a Blue Cross and Blue Shield (BCBS) carrier as the largest carrier offering health insurance in the small group market, and in all but 1 of the remaining 10 states, a BCBS carrier was among the five largest carriers.

The median market share of all the BCBS carriers in the 34 states supplying information was about 44 percent, with a range from about 6 percent in Wisconsin to about 93 percent in North Dakota.

The idea that for-profit insurers control the market with no serious nonprofit competition and therefore need a non-profit to "keep them honest" is nonsense. Nonprofit health insurers such as Blue Cross/Blue Shield and Kaiser Permanente already cover scores of millions of Americans and are often the dominant insurer in a given state or region.

And that doesn't even get into the issue of nonprofit health care providers, which often dominate care in large portions of the country. For example, Excela Health is the sole health care provider, and the largest employer, in Westmoreland Co., Penn., the largest county in the state.

Now, there are lots of reasons why nonprofits might function essentially as for-profits when it comes to health insurance (the need to avoid becoming a dumping ground for the sickest of the sick, for instance). And there are lots of reasons why nonprofits might not be able to offer significantly cheaper alternatives (state coverage mandates, for instance). But no one is proposing reforms that make sure nonprofits are fulfilling their stated missions (and thus justifying their tax-exempt status) by actually offering low-cost coverage for high-risk populations. And no one is talking about bringing for-profit hospitals or physician networks to compete with monopoly or dominant nonprofit hospitals and physician groups.

Instead, they are attacking for-profit insurers and suggesting that the profit motive itself is the real masked villain here. That argument simply doesn't hold when one realizes how much of the market nonprofit insurers (and providers) claim.

What President Obama and the Democrats want is not a nonprofit alternative to for-profit insurers. The United States is chock full of those. They want a government-run alternative. But the type of alternative Obama claims the "public option" would be already exists. So what, one wonders, is he really trying to create?

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About the Author

Andrew Cline is editorial page editor of the New Hampshire Union Leader. You can follow him on Twitter at @Drewhampshire.