NCPA - National Center for Policy Analysis


August 21, 2009

President Obama's fallback position on health care reform is being called Plan B.  It's Obamacare without the most controversial part, the creation of a government-run, "public" health insurance plan open to all comers at cut rate.  And Plan B is something that Obama and the health insurance lobby both agree on, says The Weekly Standard.

Plan B is no day at the beach for health insurers, explains the Standard:

  • By imposing an exhaustive array of regulations and installing a powerful national health commissioner, it would turn health insurers into public utilities.
  • They'd be assured a small profit, but competition among insurers would be gone and bureaucrats would be in charge.
  • They've dropped the right to turn down anyone with a preexisting ailment and agreed to something called "guaranteed issue and renewal" which means they'll insure anyone forever.

The insurers' only demand -- besides no government-run plan -- is that everyone be required to buy insurance, the so-called individual mandate, says the Standard:

  • Since Plan B would hike the cost of coverage, insurers would lose money unless the market is enlarged.
  • They want dropouts who insist on being uninsured held to a minimum (they'd have to pay a penalty under Plan B); Obama and congressional Democrats favor an individual mandate anyway.

As you might expect, there are many, many problems with Plan B, says the standard:

  • Its first impact would be on health insurers; all but the largest five or six of 1,300 insurers across the country would be out of luck.
  • Since Plan B would reduce the profits for insurance companies, and those with smaller margins -- namely, regional, state, and local insurers -- probably wouldn't be able to compete.
  • Insurers would be allowed to offer new policies after 2013 only if they joined a government-operated "exchange."
  • And the policies would have to include a minimum -- and more extensive and expensive--set of benefits.
  • This would deny smaller firms their competitive advantage of offering insurance packages with fewer benefits, specially tailored for a client's needs.

Source: Fred Barnes, "The Next Worst Thing; As Obamacare fails, the president turns to Plan B," The Weekly Standard, Vol. 14, Issue No. 44, August 10, 2009.

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