[I]t puts the onus of the responsibility for funding health coverage on employers, a decision I don’t quite understand. The employers can satisfy that responsibility by either providing comprehensive care, or helping employees purchase from a menu of insurance options provided by newly formed, state-run “Health Markets.”
As of now, the plan doesn’t explain how much employers must provide towards health market coverage, but it’s a safe bet to assume that it’s somewhat less than the total cost of health care, and so the incentive will be for employers to encourage their employees to purchase from the HMs. And that’s where things get interesting. The HMs will offer a menu of private options that are totally community rated. The plan “will require insurers to keep plans open to everyone and charge fair premiums, regardless of preexisting conditions, medical history, age, job, and other characteristics.” These days, though, community rating is a common enough.
Where the Edwards’ plan takes a big step forward is in mandating, along with the private options, that HMs offer “at least one plan [that] would be a public program based upon Medicare.” And the intent is explicit: “Health Markets will offer a choice between private insurers and a public insurance plan modeled after Medicare, but separate and apart from it. Families and individuals will choose the plan that works best for them. This American solution will reward the sector that offers the best care at the best price. Over time, the system may evolve toward a single-payer approach if individuals and businesses prefer the public plan.”
In other words, the public sector will finally be allowed to compete with the private sector, and consumers will be able to decide which style they prefer.
Like most public-private mashups Edwards’s plan has a flaw that can’t be solved by tinkering with the implementation. The employee choice model suggests that employees will sign on to things that look much more like modern individual plans than the group coverage that we have today. Private insurers who enter these “Health Markets” will have every incentive to skim off the healthier clients, who cost less to insure, with plans tailored to screen out the applicants who might cost them money. The government’s Medicare-like plan, by definition, can’t do that, and the existence of a guaranteed safety net will give the private insurers a decent argument in favor of skimming.
Private insurers will spend less on covering their skimmed clients, while the government plan will have to account for a less-desirable client pool. Private insurers’ ginormous administrative costs (it takes a lot of work to find legal ways to avoid paying a claim) could cut their advantage but I doubt that it would be enough to account for the adverse selection effect. I suppose that government could ban applicant selection by the private insurers, and Edwards’s plan may even include that, but if that were the case the idea of insurers getting on board with the plan is ludicrous. No matter how the playing field lays out I have a hard time seeing the insurance biz signing on to a forcible restructuring that ends with them competing with the government.
I think that it’s time for Democratic candidates to recognize that insurers simply won’t be your friend on this issue. There is no solution that will both improve coverage for Americans and make them happy, so any top Dem should plan to be sailing into the same winds that sank Hillarycare.
Given that private insurers will fight half-measures just as fiercely as they would a total single-payer realignment I have a hard time seeing any tactical benefit in going halfway. Worse, the basic flaws in these halfway plans could prove counterproductive if years later people look back and think well, the Democrats tried reform and it didn’t work. Now let’s see what Republicans can do. Starting with halfway measures could backfire both tactically and strategically.
In my view the problem necessitates allies who can counterbalance insurers and their titanic K Street operation. That’s a tall order, but as I laid out in two recent posts it’s clearly within our reach.