Comments on: Should a Government Health Plan compete with Private Health Plans? A Rebuttal

By: Jason Shafrin

Jason Shafrin — Thu, 28 May 2009 22:42:16 +0000

A public plan that would take the sickest patients would in theory not affect average insurance company profits, but may decrease the variability of these profits. When the government takes over sick patients, insurance company costs drop. However, insurance premiums would also fall because the insurance company wouldn’t have to pay for sicker patients. Thus, insurance company profits should not change in a competitive market. However, in some markets where there are only a handful of insurance companies, they health plans could use their market power to keep premiums high and increase profits.

By: DMG

DMG — Thu, 28 May 2009 13:24:08 +0000

I have a question that you could perhaps help me answer. I’m a physician and I’ve been considering supporting a public option plan called EMBRACE http://www.healthcare-reform.org/TheHPfHRSystem5-4-8.pdf

My question is would a public plan that eliminates insurance companies from having to compete for this sicker group of patients, what this plan is calling Tier 1 patients (also the group that costs private insurance the most money) increase profits for private insurance? Insurance companies would still be able to compete for healthier tier 2 patients. I’m interested in any comments you may have.

Thank you

By: Healthcare Economist · Letter to Obama: We’re gonna save $2 trillion

Healthcare Economist · Letter to Obama: We’re gonna save $2 trillion — Tue, 12 May 2009 05:36:22 +0000

[...] universal health insurance. It could also be the case, that these groups fear the advent of a government-run health insurance system that would compete with private insurers. [...]

By: Andrew

Andrew — Sat, 11 Apr 2009 02:43:07 +0000

I’m not so sure, Brian. It seems that a public plan, especially if the Lewin Group is correct about it having significantly lower premiums than private plans, could spark a great deal of innovation in the private industry. Insurers would have to reduce administrative costs – a far larger portion of their current business model than Medicare, for instance – and to innovate and offer plans that actually appeal to people and offer them benefits that they need.

But if Brian is right – that in the long run, private plans simply won’t be able to compete with a public plan – is that really such a bad thing? If millions of people decide that they’d prefer the public plan over their current options – plans purchased on the individual market or the typically-more generous and less-expensive plans obtained through employers – the insurance companies, who have been jacking up premiums and deductibles while reducing benefits, all the while becoming a complete hassle for every healthcare professional I’ve spoken to and a nightmare for the average consumer to deal with, will have no one to blame but themselves.

By: Brian Simpson

Brian Simpson — Wed, 01 Apr 2009 02:02:01 +0000

Initially, yes. You would increase competition in the market by one (the government). Over time though, the government plan would crowd out private companies that could not compete with a federally subsidized program.