Public Option Premiums

  • Share
  • Read Later

would actually be higher on average than those charged by private companies participating in the new health insurances exchanges. At least, that is the surprising conclusion of the Congressional Budget Office, which Politco’s Carrie Budoff Brown found in its assessment of the new House bill.:

Here’s the key passage from page 6:

Roughly one-fifth of the people purchasing coverage through the exchanges would enroll in the public plan, meaning that total enrollment in that plan would be about 6 million.

That estimate of enrollment reflects CBO’s assessment that a public plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges. The rates the public plan pays to providers would, on average, probably be comparable to the rates paid by private insurers participating in the exchanges. The public plan would have lower administrative costs than those private plans but would probably engage in less management of utilization by its enrollees and attract a less healthy pool of enrollees. (The effects of that “adverse selection” on the public plan’s premiums would be only partially offset by the “risk adjustment” procedures that would apply to all plans operating in the exchanges.)

UPDATE: Ezra Klein’s take on the CBO rationale.