A public health option (PHO) is government-introduced competition into the marketplace, wherein the government provides health benefits and health insurance as any private company might. Introducing this level of competition into the marketplace encourages rate reduction because to remain competitive, private insurance providers would need to compete with the plans offered by the U.S. government. Furthermore, in some states, private insurers have a near monopoly on the industry. If the Public Health Option were introduced into those markets, such insurers would have to lower their rates to compete with the government’s PHO.
There are, however, some concerns with the PHO. First, some argue that the federal government’s nearly limitless access to taxpayer dollars give it an unfair advantage in the market, as traditional providers cannot subsidize their revenues and services with arbitrary appropriations of taxpayer dollars. For private insurance companies, their costs, and ultimately the cost of our premiums and copays, are regulated by a complex ratio of claims and capital generated by new and existing plans. Those who argue against a PHO for these reasons suggest that the federal government would detract from their ability to gain new customers by offering alternative plans, premiums and policies. The response to this critique, however, is that that’s precisely what the federal government intends to do. For private insurers to remain competitive, they would have to reduce their rates, which could be problematic because some argue that the federal government is partially immune to market conditions since its access to taxpayer dollars serves as a source of revenue outside of the market.
There are others who suggest that a PHO would encourage doctors to provide their services through the government’s PHO rather than through a traditional private insurer’s PPO or HMO, and as such, the government would encourage private doctors to become government doctors. Though the previous argument has some basis, this argument lacks any real validity. First, one should note that a doctor, as with any health care plan, retains his/her private practice. What the doctor does agree, however, is to provide that service either as an in network or out of network provider. Depending on the plan you select, you will either pay lower rates and deductibles (if any) for in network providers and slightly higher rates for out of network providers. Though I haven’t read anything specific to this point, I would imagine that the same would hold true for a PHO.
So for example, if I have a PPO with a leading insurer, and the government PHO is offering a similar PPO, which is $50 less per pay period, I would have to wait until the end of my enrollment and then I could switch to the PHO PPO. If, while I am on the PPO I decide to visit an obviously out of network PHO provider, I would expect to pay the same rates I would were I to visit any out of network provider. In my understanding, all PHO providers would be considered out of network providers, which already exist in the insurance marketplace. Thus, there is no threat for doctors to all become government doctors, rather they would simply provide their services through the government PHO. Those with traditional PPOs could still visit these doctors as out of network providers.
I agree that there is a lot that is unclear in a proposed PHO but if the President were to fully explain its structure, there may be much less resistance. Some of the questions President Obama should be prepared to answer are (1) How will in network and out of network designations affect rates for non PHO policy holders? (2) Will the government institute similar in network, out of network plans, and if so how will that affect deductibles and copays? (3) Finally, can doctors offer their services through the PHO and private insurers or is that inherently a conflict of interest?