Private health insurance would not be threatened by public health plans, according to a new policy paper released by the New America Foundation.
Several leading healthcare reform proposals – including President Barack Obama's – promote competition between private health plans and a public health insurance option. "Unfortunately, the debate over this issue has become polarized unnecessarily," said authors Len Nichols and John M. Bertko.
For their paper, "A Modest Proposal for a Competing Public Health Plan," Nichols and Bertko studied information from more than 30 state governments that offer employees a choice between traditional private health insurance products and a plan self-insured by the state. They also studied information on the historic competition between public and private plans in both the Medicare program and California Public Employees Retirement System (CALPERS).
The authors said there is proof that plans operating with politically appointed managers can compete with plans run by private managers "if the rules of engagement are structured properly."
The paper shows that public plans can compete fairly with private plans if the rules of the insurance marketplace (or exchange) apply to all plans and the governance structure is designed to isolate the public plan from unfair advantages and perverse incentives.
The paper comes as Congress gears up to craft bipartisan healthcare reform legislation that would pit the Democrat public-private healthcare reform plan against reluctance from Republicans, who fear private plans may be unfairly crowded out of the market.