Why is everyone convinced the public option will eliminate private insurance companies?

[hedgehog]

Insurance companies today take your premiums and invest them, at least that's my understanding. In theory, they make such a high profit that it pays for the customers' medical bills and leaves a nice chunk of change for the stockholders of the insurance company.

It's my understanding that the public option will be a free standing company funded solely by premiums with no tax money involved. I doubt it will be investing in anything on the open market although I suppose it might buy up some Treasury bonds.

So the private companies make money on the stock market, the public option makes money (maybe) on lower return bonds. Yet everyone is assuming that the public option will offer the same insurance as the private companies but at a lower premium which will result in the demise of the private companies.

[BlooInBloo]

1. They make money in 2 ways. First by winning bets with people, second by investing in the meantime.

I'm not sure offhand which source of income is greater.

[elleng]

2. 'Everyone' is not convinced.

Its one of 'their' damned talking points.

[Sanity Claws]

3. Because everyone knows the private insurers suck

They take your premiums but won't provide coverage. People who are stuck with them will never use them again, if given a choice.

[panader0]

4. It may not eliminate the insurance companies

but it will probably eliminate huge salaries and bonuses for the CEOs.
Which brings up the question: who will administer the public option (if it passes) and will it be a non-profit?

[LostInAnomie]

5. They aren't actually concerned about insurance companies becoming extinct.

The real concern is that an industry that has been making immoral profits in the most immoral way possible might be relegated to making reasonable profits in a slightly less immoral way.

Rich execs, investors, and paid off congressmen want to avoid that by any mean necessary.

[rucky]

6. They're afraid they can't compete.

but really they'll just have to find their own niches. There'll still be a market for private - it just won't be a monopoly empire. More boutique-y.

[abumbyanyothername]

7. First of all we're not convinced.

(see my post captioned Santa Monica Public Library, Barnes & Noble, Amazon)

Secondly, healthcare insurers are more like huge HMOs these days than traditional insurance companies. They take premiums. Skim for administration and profit and pay out charges, all on a fairly short cycle. Pretty much the only capital that they hold is whatever is statutorily required.

[Yupster]

8. There are two worries I've heard

1. How do you compete against a competitor who can make the rules, change them anytime and take some of your profits to use against you.

2.How do you compete against a competitor who can lose unlimited amounts of money and offer unlimited and constantly growing benefits.

oh - and a third

3. Companies, especially small businesses will just say screw it and go with the government option so they can go back to plumbing or whatever they do.

I agree that a public option will eventually put the private insurance companies out of business but I consider that a good thing. It's stupid to tie insurance to employment.

[TheKentuckian]

9. A mix of the knowledge (admitted or not) that they are crap and they don't want to give up a cent

and muddy the waters to do it.

[Sarah Ibarruri]

10. It might not, but I want something that gets us a foot in the door towards a BETTER health care than

the piece of SHIT we have now.

[ellenfl]

11. because the private insurance companies will have to make

less profit so they are spreading that meme. it's a total red herring. the insurance companies want to continue to pick our pockets and let us die so they can continue to make the big bucks. the funny thing is that from the other side of their mouths they are saying the gummint is not competent to run health care . . . but apparently is so competent as to put the private sector out of business. pure corporate double speak.

ellen fl

[baldguy]

12. Because there will be a continual erosion of customers from the for-profit insurers

to the govt option. If it works even half as well as it's been advertised, very few will go the other way.

[FLDCVADem]

13. Because a government plan can...

...offer low reimbursement rates then...
...force all docs to take those rates, which...
...forces docs to negotiate higher rates with insurance companies to make up the difference who then...
...raise rates until...
...either employers or employees or both can no longer afford the premiums which...
...forces people into the public plan, thereby forcing the private company out of business...

[hedgehog]

25. If things go as you say, the doctors end up negotiating with one

payer rather than being nibbled to death by a hundred different plans like now.

[The Velveteen Ocelot]

14. Because the US Postal Service put FedEx and UPS out of business.

And Amtrak has crushed the airlines, and there are no private colleges any more because the state universities drove schools like Harvard and Yale and Princeton into bankruptcy. These examples prove that no private business can ever compete with the government.






Oh, wait.....

[geek_sabre]

15. To be fair

The USPS existed for a long time before UPS and FedEx came along. And since they have (and with some help from email) USPS is bleeding money. A multiple billion dollar debt each year. FedEx and UPS are turning profits. If it was an actual competition, including first class, the USPS would not stand a chance. The reason FedEx and UPS came along in the first place was because there was something lacking with the USPS.

Any federal public option cannot, by design, directly compete with private insurance companies. Why? Because the public option is open and equal in all states, whereas private insurance companies are restricted (by congress) to do business within state lines, and abide by individual state mandates. The public option will absolutely drive them out of business, in the poorest areas first, then through the middle class. If the private insurance companies are allowed to compete in all states, or if there is a "national standard" that overrides individual state guidelines for insurance plans, the public option has no chance of running "deficit neutral."

[Daylight]

22. There needs to be a national standard.

People should be free to shop around for the policy they like even if it comes from a different state.

Additionally, we need to open the national borders so we can legally purchase drugs from Canada where the drug manufactures sell them cheaper than they do in the US.

[geek_sabre]

24. Why not try that first?

Allowing insurance companies to sell nationwide and actually compete with each other would lead to a significant decrease in the cost of insurance. My sister and I had the same coverage for years, and because we lived in different states (her in NJ, me in KY), her coverage cost 4-5 times more.

It is unlikely that, if Americans began to purchase drugs from Canada systematically, the drug companies would continue to sell drugs to Canada at such low prices.

[Hannah Bell]

23. no, the reason fedex/ups came along is because bought politicians rigged the rules

to open the profitable parts of mail service to private corps & the junk mail biz as a subsidy to corporations, funded by taxpayers.

[hedgehog]

26. I think it's the other way around for your example. USPS makes

deliveries of all classes of mail, 6 days a week to every address in the country. FedEx and UPS take what packages they want, charge what he market will bear and refuse some addresses in remote areas. They are cherry picking the business, just like private insurance companies that give group rates to large corporations and refuse pre-existing conditions.

[backscatter712]

16. Because the insurance companies and their astroturfers are lying their asses off.

They can't stand the competition, so they make shit up to scare old and gullible people.

[madville]

17. It's going to be the employers pushing people to the public option

I'm fully expecting the people I work for to drop our insurance coverage and point us to the public option. It will save them a fortune even if they have to pay a 10% payroll penalty or something for doing so.

[hedgehog]

29. Your company can drop its group plan, but it can't point you anywhere.

You'll still have the option of buying your own private insurance.

[timtom]

18. Wishful thinking?

[TankLV]

19. My fervent wish is that they would - we need to get "insurance" OUT of "Health CARE". Period.

Nothing less will do.

But We will not get "public health care" in any way shape or form in the near future...

[ZombieHorde]

20. Why are you "convinced the public option will eliminate private insurance companies?"

[hedgehog]

27. I'm not convinced because I figure that private insurance

companies will figure out how to stay around. That's why I asked the question. Perhaps I should have said everyone on the Right is convinced the private companies are going down.

[Kievan Rus]

21. Because Rush says it will

[Statistical]

28. Investments made less than 5% of revenue for AETNA compared to 37% for life insurance companies

If pubic plan had a rate of return of half that of public plans on investments it would only affect total revenue by ~2%.

Life insurance, homeowner insurance, and to a lesser extent auto insurance make money by investing.
The reason is the insured event happens rarely (or in life insurance) only once.

So $1 in life insurance premium collected today and paid out 40 years from now will be worth $21 if invested @ 8% annual gain.
The vast majority of a payout in life insurance comes from the return on the premium.

Not so much with health insurance. People need routine and constant payments. Doctor visits, accidents, routine illness, medicastion.

Take birth control for example that is an expense that the insurance company will pay every month for the majority of a woman's life.
There is no accumulated premium pool that is invested.

This is a good reason why health insurance should be a right and administered via single payer as other services are (Police, Fire Dept, education, etc).

Considering insurance cost is "hidden" by employers (most pay between 30% & 60% of total cost) a public option will either be usubsidized and massively more expensive for most Americans who have employer based plans or it will be cheaper for employers to drop private plans, raise wages, and have employees use private plan.

Take my job for exmaple:

My total health care premiums are:
paid by me $128 per month
paid by my employer $670 per month
total: $798 per month.

Now lets say 30% of that is wasted (profit & overhead). That means a comparable public option plan would be $560 per month.
Unsubsidized it would be 4x what I pay "out of pocket" compared to my employer.

If it were subsidized say 50% then it would cost me $280. Now my employer could drop the private plan completely (save $670 per month). Raise wages $400 per month. Company pockets $370 ($670-$400), my after healthcare income is higher. $280 - $128 + $400 = $552 more than on the private plan.

So either a public option will be so weak as to be useless or it will kill private insurance eventually. Which is why it would make more sense to just go single payer from the beginning.

[hedgehog]

30. I think the problem is that health insurance used to work like life insurance for the investors..

Think back to 1950. When did you see a doctor except to have a baby, get the baby shots, fix a broken arm or because you were dying? Now you go to the doctor for preventive care and pay for pills to keep you healthy. I agree with you that the old model of private health insurance isn't working, but who in the industry wants to admit that?

[Statistical]

33. Agreed.

There really is no model other than passing 100% of the costs + profit requirements on to the "consumer". There is no market because the only cost effective health insurance is through your employer and you have a single company to choose from. Even health insurance through employer isn't cost effective the true cost is simply hidden.

Now I am not saying public option killing private insurance is bad thing but I can't see a situation where a competitive public option plan doesn't kill private insurance. Given that single payer makes much more sense. Get rid of VA health care, govt worker & military health care, medicare, and medicaid at the same time.

The only good thing I can see is a competitive public option could some day become single payer. Acceptable of public option may increase support for single payer in 10 to 20 years. Maybe.

[slipslidingaway]

31. I'm not convinced, but many people say that this will lead to a

SP system.

:(

[hedgehog]

34. I'm not sure who to believe any more, the left wingers who say

the health plans on the table will wipe out any chance for single payer, or the right wingers who say the plans make single payer inevitable!

I think the truth is that President Obama has them boxed: either the plan is a step to single payer or the results will be such that we won't need single payer.

[slipslidingaway]

35. Estimates are that only 10-11 million people will be enrolled in

the "public option" by 2019, Howard Dean has said that only 5-10 million people will be enrolled in the plan.

IMO that is a very slow step, if one could even call it a step.

:(

[ipaint]

32. Because they haven't been told by their representatives

That the public option will more than likely be farmed out to private insurance corporations to run.
A privatized "medicare for all" public option.

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