There needs to be more competition in the healthcare market, but this idea that a “public option” could fairly compete with private insurers has never really made sense.
Since a public insurer has no obligation to price its services above cost (i.e., it can run at a taxpayer-subsidized loss ad infinitum), it’s hard to see what private insurers could do to win over customers.
But what’s really ridiculous is the idea that the public option would be funded, in part, by a new tax on private health insurers.
The FT’s Lex column rightly takes it to task:
The main distinction between soaking insurers directly and eliminating the tax-free nature of employer health benefits is that the latter proved wildly unpopular, particularly among Democrats’ union allies, while the former is palatable to all but insurers’ shareholders. But the distinction would rob Peter to pay Paul as both would result in higher customer outlays or more limited coverage for those already insured.
Healthcare companies, including drugmakers, would pay a direct levy and people with high-priced health insurance would also pay. Taxing what politicians dub “Cadillac” health plans has other flaws though. It would not distinguish between typical private sector employees who pay nearly a third of premiums out of pocket and those of civil servants who often pay next to nothing. It would also disproportionately hit policies in high-cost states that bar insurers from denying coverage to riskier customers, thus discouraging a key goal of healthcare reform.
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