NCPA - National Center for Policy Analysis


May 6, 2009

On Monday, Sen. Charles Schumer (D-N.Y.) proposed that any public health insurance option developed as part of comprehensive health care reform legislation be subject to the same rules and standards as private insurance.

According to the New York Times, congressional Democrats are trying to "shift the debate from the question of whether to create a public health insurance plan to the question of how it would work" in an effort to gain support from moderates.

Schumer set forth the following principles for such a plan:

  • The public plan should be self-sustaining by paying claims with money accrued from premiums and copayments, rather than tax revenue or government appropriations.
  • A public plan should pay physicians and hospitals more than Medicare.
  • Physicians and hospitals should not be required to participate in the public plan simply because they participate in Medicare.
  • Officials who regulate the insurance market should be different from those who manage the public plan.
  • A public plan should be required to establish a reserve fund, just as private insurers do, for anticipated claims.
  • A public plan should be required to offer the same minimum benefits as private plans.

Schumer said that his goal was "a level playing field for competition" between private and public insurance.

However, Karen Ignagni, president and CEO of America's Health Insurance Plans, said, "It's almost impossible to accomplish that objective."

Some thorny questions remain, says the Times:

  • Could states tax the premiums of a public plan, as they tax private insurance premiums?
  • Would the public plan have to comply with state laws, as private insurers do?
  • Would the government ever allow the public plan to become insolvent?

In the pursuit of universal coverage, liberal Democrats say, it would be a mistake to rely entirely on the same insurance companies that have profited by selecting healthier customers, avoiding sick people and refusing to pay many legitimate claims.

Source: Robert Pear, "Schumer Offers Middle Ground on Health Care," New York Times, May 5, 2009.

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