PUBLIC PLAN WOULD COVER THE UNINSURED; MAY PUT PRIVATE INSURERS OUT OF BUSINESS

April 8, 2009

A public health insurance option for middle class families could help cover the uninsured but it may well put private insurers out of business, says the Lewin Group, a health care policy research and management consulting firm. 

President Barack Obama and many Democrats want to create a government insurance plan to compete with private plans that now cover about 170 million Americans. But according to Lewin, if such a plan were open to all employers and individuals, and if it paid doctors and hospitals the same as Medicare, the government plan would quickly grow to 131 million members, while enrollment in private insurance plans would plummet.

In fact, the private insurance industry might just fizzle out altogether:

  • By paying Medicare rates the government plan would be able to set premiums well below what private plans charge.
  • Monthly premiums for family coverage would be $761 in the government plan, compared with an average of $970 in private plans.
  • Employers and individuals would flock to the public plan to cut costs.

However, Obama hasn't spelled out in detail what he'd like to see in a public plan.  As a candidate, he said it would only be open to small employers, individuals and the self-employed.  When Lewin ran the numbers for that limited scenario, the results were not as sweeping:

  • A public plan for small employers and individuals that paid Medicare fees would have nearly 43 million members; if designed like a private plan, it would only enroll 17 million members.
  • Such a public plan would help reduce the number of uninsured by about 24 million to 28 million people, depending on how it was designed.

Source: Ricardo Alonso-Zaldivar, "Study: Public plan would cover the uninsured but may put private insurers out of business," Los Angeles Times, April 6, 2009; based upon: John Sheils and Randy Haught, "The Cost and Coverage impacts of a Public Plan: Alternative Design Options," Lewin Group, April 6, 2009.

 

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