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Giving Americans real healthcare choice in an affordable, dependable public plan option

Insurance-industry controlled market leaves consumers with unreliable, unaffordabe and unpopular health coverage

For more information, contact:
Bill Vaughan, Adrianne Hahn, 202-462-6262

Giving Americans real health-care choice: A public plan option

Problem: Private insurance often unreliable, unaffordable and unpopular
It’s arguably not for a lack of trying that most of the 48 million uninsured in America don’t have health coverage. Nine out of every 10 people who look into buying an individual policy don’t sign up because it either cost too much, they were rejected for health reasons, or the coverage was so skimpy it wasn’t worth the price, a Commonwealth Fund survey found.

Have a pre-existing condition? Then you must pay whatever rate the insurance company charges, or face no coverage at all. In most states, insurance companies can reduce services and increase prices as much as they want to cover costs and make a profit. And there is profit – in 2006, the nation’s six biggest private health insurers collectively earned almost $11 billion.

Those fortunate to have insurance through their jobs are finding the coverage gets them less each year. A Consumer Reports national survey found that 29 percent of people with health insurance were “underinsured,” with coverage so meager they postpone medical care because of costs. More are dropping their job-based coverage because they can’t afford the premiums (employees pay an average $3,354 out of their paychecks each year to cover their share). And with each new round of layoffs come more uninsured. If unemployment, already well above 7 percent, hits 0 percent this year, an estimated 13 million Americans will have lost their employer coverage since 2007, according to the Kaiser Family Foundation.

For most adults who lose a job, are self-employed or work for an employer that doesn’t offer insurance, get divorced from a spouse with coverage, have an adult child leaving a group plan, or hope to retire early, theirs’ is a grim choice: Try and get unreliable, costly coverage in our current private insurance market, or be uninsured.

Solution: Give Americans the choice of private insurance or a stable public plan
Consumers Union, the nonprofit publisher of Consumer Reports, supports giving Americans without health coverage an additional choice: The choice of a public plan that people can count on to cover what they need, when they need it, at more affordable rates. This new option allows people who have insurance that they like to keep it, while millions without good insurance can gain access to reliable care – no denials for pre-existing conditions with a consistent menu of benefits.

The benefits of a public plan option include:
• Ensure choice while protecting the private insurance system we now have. A public plan option will be paid for by enrollees’ premiums – not taxpayers. Those who can’t afford to pay premiums would be eligible for subsidies based on their income, whether they choose the public plan or a plan sold by insurance companies. This ensures a robust market with choices to fit every family’s individual priorities.
• Improve prevention and lower costs by treating people early. With reliable coverage, people will get regular and early care instead of waiting for an illness to become a costly and dangerous emergency. Right now insurers move in and out of markets, change their benefits frequently and shift the providers with whom they contract. These constant changes undermine patients and providers, especially when it comes to coordinated care. Access to a dependable plan will improve the early detection of life threatening conditions, and deliver better education about healthy choices. That will bring down costs for everyone.

• Improve productivity and reduce stress. Knowing that a single illness could wipe us out financially only adds to the stress of this difficult economic time. The public plan provides security that there’s an affordable alternative to the coverage we have now if we change jobs, start a business, or return to school. Millions who now avoid going to the doctor for ordinary illnesses will be able to get treatment and get back to work, improving productivity and the health of our nation’s workplaces.
• Reduce unreimbursed health costs and medical debt that impact our economy. We all pay more to help pick up the $56 billion in uncompensated care for the growing number of uninsured workers. And getting care for ourselves exhausts us financially. Nearly 72 million adults had problems paying medical bills or were paying off medical debt in 2007, up from 58 million in 2005. Some 39 percent said they had exhausted their savings paying for healthcare. By providing access to affordable insurance options that guarantee coverage, we could help eliminate the burdens of uncompensated care, medical debt and bankruptcies that damage our economic recovery.
• Create competition that lowers price and improves service. Private and public insurance have their own strengths and weaknesses, and should compete on a level playing field where consumers can choose those plans that deliver the best value and care. A recent study by The Lewin Group, a healthcare policy research group, found that a public-plan option will cost at least 10 percent less than private plans, in part because it will have lower administrative costs and no need for a profit-markup.

The government has done better at controlling spiraling healthcare costs than the private sector. Between 1997 and 2006, health spending under private insurance grew at 7.3 percent a year, compared with just 4.6 percent under Medicare. And Medicare pays private insurers who offer Medicare Advantage plans 13 to 17 percent more than it would spend to care for seniors directly. Meanwhile, private plans have a track record of designing new benefit options, and their innovations and care management strategies will put pressure on the public plan to do the same.

• Choice will improve the transition when we expand coverage. Our nation has witnessed the coverage chaos and economic fallout when the insurance industry controls our choices – just look to the Medicare Part D program. In 2003, Congress approved giving seniors a prescription drug benefit, but blocked Medicare from offering its own plan, instead giving private insurance companies the exclusive right. If Medicare were allowed to negotiate drug prices, a 2006 Congressional study found that prices could be cut by 25 percent – saving taxpayers $61 billion over the next decade. And seniors often experienced inconsistent coverage and pricing in the private plans. Research found that the majority of drug plans in Part D raised their prices for drugs once seniors were locked into their annual choice.

Allowing Americans the opportunity to choose between a variety of private coverage options and a stable, consistent public option will improve prevention and productivity, lower costs and ultimately improve healthcare services as insurers compete to offer beneficiaries an array of coverage options at a better price.