Wednesday, September 22, 2010

Health insurers exploit the absence of a public option

Susie Madrak in Health Insurers Up The Ante Over Pre-existing Conditions Rule By Denying Coverage To Children. What Next? Crooks and Liars 09/21/2010 comments on the decision by some major health insurers to drop their child-only policies because the new health care reform prohibits them from denying coverage for pre-existing conditions.

This already displays in practice the likely-fatal weakness of the Obama health care reform: the absence of a robust public option. Big insurers can and will exploit the loopholes in the regulations in the law. They can and will use the harm caused by their own self-interested actions to attack the health care reform and whittle it down, piece by piece.

Having a robust public option, such as the option for people to buy into Medicare, would change their whole competitive calculus. With a viable public option, actions like this would immediately drive some of their current customers to the public option. And once they insurance companies had demonstrated their unreliability in providing a particular kind of insurance, they would have a hard time ever winning it back.

More broadly, once the public option proved to be not only reliable but cheaper than private options, it would drive private insurers to boost their own service quality and their prices more attractive.

But Obama followed the neoliberal script and gave private insurers the major prize they wanted - the individual mandate forcing individuals to buy insurance while giving the insurers big loopholes such as high deductibles - without getting the critical element that would make such a private-based system work adequately - the public option.

Obama sneered at voters who were concerned about the absence of the public option to wealthy donors in Connecticut recently. But the public option passed the House and had 59 votes in the Senate. But Obama and Harry Reid used Joe Lieberman's opposition to hide behind their self-imposed 60-vote standard to eliminate the public option. Because that was the deal the administration made with the insurance lobby. But the problem is real.

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