Public Option will be Good for Private Insurers

Most of the private health care insurers and their supporters are strongly against a public option because they fear that a public option will reduce their business and profits and may, in the extreme, put them out of business. The private insurers are being short sighted and I think that a public option will actually increase the business and profits of the private insurers assuming that health care reform includes a tax credit for most people to help pay for insurance which is likely or requires health insurance for everyone.

The tax credit will help a large number of people keep medical insurance who would otherwise drop coverage due to cost. Every private interest group with a health concern will lobby their local politician to add covered medical services that private insurers don't include thereby increasing the cost of the public option. For instance, maternity care will probably be included in basic coverage (now this is an extra charge coverage that older people, single men, etc. don't need to include or pay for), extended home care, autism personal care without limit, unlimited psychological services, etc. will be included which will drive the premium cost much higher than the private insurers. The net result is that the private insurers will be able to raise prices significantly and still cost less than the public option and will have more policyholders due to the tax credits that will help many pay for their premiums. The private insurers will do even better if there is mandatory coverage for everyone. As far as being required to accept people with pre-existing conditions without a surcharge, they will be able to raise premiums for all of their policy holders to pay for the extra costs that would be expected.

The public option will be good for the private insurer's business.

As far as a health co-op which is being touted by Republicans and some Democrats as an alternative to the public option, no details of how a co-op would work have been provided. There are generally two different approaches to the operation of a co-op for health care which are:

1 - A buying co-op in which the co-op would negotiate premiums for pools of people looking for medical insurance. This would provide some of the same buying power that large organizations have in negotiating lower insurance costs for their employees. This may result in lower rates for individuals and small firms but, if the majority of the people in these pools are those people who have health problems significant enough to be declined by existing insurers, then rates will probably be higher than the rates for typical employee coverage.
2 - A health co-op modeled on existing agricultural co-ops where the co-op would own the health care provider facilities such as hospitals and the doctors, nurses and other health care providers would be employees of the co-op. This is probably the type of co-op that the Republicans have in mind when they talk about co-ops which is amazing because the Republicans have argued against a public option claiming that a public option is socialized medicine. A health care co-op more closely fits the definition of socialism and more closely resembles the health care system in Britain.