Again, the size of the risk pool is what makes this work. If you have 200 million insured the effect of the small percentage of the chronically ill would allow prices to very low. Since this is not a universal Medicare the highest risk population—the elderly—would remain in government funded Medicare making this risk pool even less risky. But it is the size of the risk pool that the insurers are afraid of.
Due to the low pricing and relaxed underwriting standards the Public Option Company could offer all those small and medium sized businesses-- businesses that either cannot offer health insurance to their employees or are offering it at great expense--would immediately sign up.
These companies represent the highest profits for the insurance industry. That is why they’ve lobbied so hard to keep small/medium businesses from being able join together into large bargaining units/risk pools. Take this small/medium corporate population away and a lot of profit vanishes overnight.
The larger corporations would probably also have to offer the Public Option as an alternative to their employees in the same cost sharing model in place today. If the costs were lower and the underwriting rules better (no pre-existing condition clauses even without a letter of creditable coverage) the employees would likely pick the cheaper, better option.
The end of the medical insurance industry would be in sight, but it wouldn’t be immediate.
Public option would be offering medical insurance with lower deductibles, smaller co-pays, larger coverage limits, and no pre-existing condition clauses at a much lower price than any of the current players in the insurance industry.
The public option might even be able to go back to the 90/10% and 100% hospital model that some of the older folks out there remember ( Insurance wasn’t always the horror that it is now. At one time you could get very, very sick and not lose everything. But that is a historical tale).
Even with all this many employees wouldn’t change from their existing insurance companies. People are just like that. Inertia is a very powerful force and many just don’t like change.
But the Public Option presence in the market would still represent an existential threat to the medical insurance industry. However, the looming death sentence would not be carried out with such swift brutality.
There would be time for a massive industry consolidation where risk pools would be rapidly combined and new, more competitive products could be developed and offered.
I could see health insurance lobbyists getting bills introduced that would allow small and medium businesses to join into much larger risk pools/bargaining units. The irony of that would boggle the mind.
But again, it is all actuarial numbers. The bigger the risk pool—the less impact it has if you or I develop a terminal illness or need an operation.
Fight to the Death or Graceful Surrender
Both the single payer and the public insurance option represent the end of the world as the medical insurance industry knows it. It is not that these companies cannot take all that money that they’ve made and use it to fund something else, but that is not an overnight process.
This is why it is going to get ugly. Everyone in this fight must recognize that your opponent’s back is against the wall and they are going to martial every resource at their disposal to fight this.
The end game is that this will either be a war to the death or a war with terms of surrender.
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