Health Care: The Public Option Fallback

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Maine Senator Olympia Snowe’s idea of creating a public option as only a fallback if private insurance companies fail to produce genuine competition seems to be gaining currency at both ends of Pennsylvania Avenue at the moment. Today’s Washington Post has new details on how a “trigger” would work:

…in recent days, the White House has aggressively pursued a deal with Sen. Olympia J. Snowe (R-Maine), a member of the Gang of Six. She favors a slimmed-down bill that would take effect more slowly and would create a public insurance plan only if private insurance companies do not offer better coverage at lower rates. Under Snowe’s “safety-net option,” aides said, private insurance companies would be asked to develop plans affordable to 95 percent of the population in a given state or region.

In areas where private firms do not comply by 2013 — when people are scheduled to begin entering a new federal insurance exchange — a nonprofit insurance plan sponsored by the government would be added to the list of private options.

What is “affordable”? We we noted yesterday, that is a key question underpinning the entire health reform effort. Here, from yesterday’s NYT, is Snowe’s idea:

The public insurance plan would be offered in any state where fewer than 95 percent of the residents had access to affordable coverage.

Congress would define “affordable” with a sliding scale based on income. Under a proposal being considered by the Finance Committee, Medicaid would be extended to anyone with income less than 133 percent of the poverty level ($29,327 for a family of four).

For people with incomes just above that level, insurance would be considered affordable if they could find a policy with premiums equal to no more than, say, 3 percent or 4 percent of their income. For people with incomes exceeding three times the poverty level ($66,150 for a family of four), insurance might be deemed unaffordable if the premiums were more than, say, 12.5 percent to 15 percent of their income.

The theory here, of course, is that this is another way of reaching President Obama’s stated goal for a public option, which is to keep insurance companies “honest.” And it is an idea that White House Chief of Staff Rahm Emanuel has been flirting with for months.

Insurance companies are likely to go along as well. They backed a similar trigger mechanism when it was used with the Medicare prescription drug program a few years back: The government would be allowed into the market only if private insurance companies weren’t competitive enough on their own. That “trigger” has never been pulled. But for those who advocate a public plan, this is likely to be seen as the weakest possible option, short of dropping it altogether. It would be, in their view, a mirage.

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