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How a Public Option May Preserve Health Insurance Exchanges

What type of effect would a public coverage option available on the health insurance exchanges have on commercial payers?

Multiple healthcare payers have been struggling with operating successfully on the Affordable Care Act’s health insurance exchanges. Some experts and lawmakers suggest that establishing a public option on the health insurance exchanges could create a stronger, more competitive marketplace and foster a better environment for payers to meet consumer needs.

Public Coverage Option

At the end of last year, the national payer UnitedHealthcare announced that it would be leaving the health insurance exchanges since it suffered major profit losses. The future of the exchanges may depend upon whether other health payers face the same challenges and choose to leave the ACA marketplace due to declining profits.

Last December, Merrill Matthews, a resident scholar at the Institute for Policy Innovation, spoke with HealthPayerIntelligence.com about how the actions of UnitedHealthcare may impact other payers and the future of the health insurance exchanges.

“UnitedHealthcare doesn’t feel like it can stay profitable in that group of business and it would indicate that others might be struggling as well,” Matthews explained. “Several insurers came out and said that they’re still committed to being here, but it might indicate the death spiral that we’re concerned about in the exchanges. There’s been a long-running concern that what the exchanges will ultimately be is the place where the people who are the sickest and need subsidies from the federal government will reside.”

“The question comes about – would even some of those people be able to buy cheaper insurance, even considering the subsidies, outside of the exchange if a death spiral initiates. If so, does that ultimately make the exchanges unworkable?” he questioned.

Dr. John Geyman, Professor Emeritus of Family Medicine at the University of Washington School of Medicine, described the many problems of the healthcare industry with a particular focus on its profit-driven structure. For instance, in a fee-for-service environment, providers are incentivized to offer more unnecessary services and may even pose harm to patients.

“You have to realize that the insurance industry is almost entirely for profit,” Geyman told HealthPayerIntelligence.com. “That wasn’t true when health insurance started way back in 1929. The first private insurers were in Dallas Texas and they were not for profit and did not do medical underwriting. They were based on public service.”

Healthcare payers operate in a similar fashion and many may leave the health insurance exchanges solely based on their ability to make profit, explained Geyman.

“Today, if they can’t make money, they get out of the market,” he added. “I think UnitedHealthcare will have an impact on the whole industry and the others will follow suit. Some will leave individual markets and some will go into other markets. Unless they go continue to make what their shareholders want and their CEOs want, they are not about service.”

“I think they’re an unsustainable industry and I think they’re on a death march,” Geyman cautioned. “If it were not for multiple ways for government subsidies, they would not still be here. Indeed, 63 percent of the total healthcare bill is paid by the government these days. A lot of it is used to prop up the private insurance industry and to keep the drug industry going just fine without imports of drugs from other countries and without negotiating prices down.”

While the health insurance industry has faced some challenges, progressive lawmakers including Senators Bernie Sanders (I-Vt.), Dick Durbin (D-Ill.), Chuck Schumer (D-N.Y.) Patty Murray (D-Wash.) and Jeff Merkley (D-Ore.) claim that a public option for healthcare coverage available on the health insurance exchanges could benefit payers by boosting competition. Stephanie Taylor, co-founder of the Progressive Change Campaign Committee (PCCC), has stated that this strong progressive push for a public option has not been as significant since the passage of the Affordable Care Act.

Additionally, the Democratic presidential nominee Hillary Clinton supports the idea of providing a public option on the health insurance exchanges. However, The Hill reports that lobbyists for the Affordable Care Act have rejected the proposal of a public coverage option.

The stakeholders in the country’s biggest hospital, pharmaceutical and insurer trade groups stated that they would not support the idea of a public option until they confirm that the ACA health insurance exchanges operate successfully. However, Senator Bernie Sanders has stated that a government-run public option would boost competition across the country and particularly in rural regions.

This past summer, Clinton also began supporting the public option, which was initially rejected during the first proposals from the Affordable Care Act legislation. Democrats hope to bring new light to the public option in 2017.

In July, President Obama wrote a statement for the The Journal of the American Medical Association (JAMA), in which he highlighted the progress of the Affordable Care act. Obama encouraged Congress to consider the public option again, suggesting that it would increase competition among private payers operating on the exchanges, strengthen the health insurance marketplace, and provide affordable coverage to consumer countrywide.

The potential for higher premiums is on the horizon and providing a public option could sway the view of consumers regarding the Affordable Care Act, reported the Associated Press. In particular, some lawmakers are pushing the idea of offering state waivers so that individual states can test out the idea of a public option.

Additionally, when more payers are facing high-risk patient populations that need more costly care, commercial insurers could move this population onto a public coverage option, said David Himmelstein, co-founder of Physicians for a National Health Program, to the Associated Press.

If the federal government passes legislation for a public option, private payers may be able to compete more effectively on the health insurance exchanges and the Affordable Care Act may be preserved for decades to come.

 

Dig Deeper:

How the Affordable Care Act Changed the Face of Health Insurance

How Payers Could Succeed in ACA Health Insurance Exchanges

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