# Would a public option force insurance out of business? **URL:** \ **Category:** Great Debates\ **Created:** [September 9, 2009, 12:32pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411 "2009-09-09T12:32:45Z")\ **Posts on this page:** 20\ **Page:** 5
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:21pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/81 "2009-09-11T19:21:49Z")
> [@elucidator](#): > > Its about “rescission’s”… > … can the insurance companies do business without pulling this kind of crap? If they can, why don’t they? And if they can’t, what _fucking_ good are they? Its the competition in the marketplace. Lets assume that every insurance company provided the the coverage they promised to provide when you need it. Then a new insurance company comes along as realizes that they pay out the vast vast majority of their claim dollars to a very small number of insureds who come down with cancer or something, so they start rescinding the contracts of the expensive cancer patients (lets say one insured out of a 100) and as a result are able to lower their premiums and they start gaining market share. The other insurance companies realize what the new insurance is doing but they are powerless to stop it or to gain a sufficient marketing advantage from promoting this 1% difference in customer satisfaction so they start playing the same game and they are competitive once more. Then a new guy comes along nd pulls the same crap with AIDS or something and before you know it insurance really only covers youwhen you don’t need it. This is all a bit exxagerated but you get the point. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:24pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/82 "2009-09-11T19:24:26Z")
> [@The\_Other\_Waldo\_Pepper](#): > > It’s not about being much more efficient. It’s about not having to break even. > > Even a perfectly efficient private company would have trouble against a competitor that’s cheerfully operating at a loss for decade after decade after decade. The public option would have to break even after its start-up period. If it is losing money, it would have to raise premiums. However, it does not have a profit requirement and the executives probably won’t be paid as well as the CEO of United Healthcare. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:29pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/83 "2009-09-11T19:29:52Z")
> [@The\_Other\_Waldo\_Pepper](#): > > If I think the authorities should get a warrant to tap a man’s phone, isn’t it okay for me to think they should get a warrant to do likewise for a corporation? If I’m against them taking _ **your** _ property without just compensation, can’t I _ **also** _ oppose them doing the same thing to IBM or Coca-Cola? There is an election law case currently being considered in the Supreme Court and one of the underlying issues is whether a corporation has the same set of rights as a natural born citizen. In the court case it has to do with the a corporation’s right to political speech (spend millions of dollars supporting or opposing a political candidate) versus an individual’s right to political speech. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:42pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/84 "2009-09-11T19:42:45Z")
> [@jtgain](#): > > It seems like there is a lot of double talk in this thread. Some are glad to be rid of private insurers. Fine, that’s an honest position but not one that has been forwarded by the President. I guess if I was presenting the public option honestly I would say that the Public Option is going to be an insurance exchange (much like what federal employees and members of congress use right now), it will include plans from private insurance companies as well as plans from a non-profit insurance company that is set up by the government. The Public Option is not going to force you to choose from the plans available on the exchange but it will inject competition into the market and frankly it may inject enough cometition that some inefficiently run companies aren’t going to make it because people will opt for the public option. The government sponsored plan will not be subsidized by the government (other than start-up costs) any more than other private insurance companies on the exchange but they will not have a profit motive and probably have lower executive compensation. Insurance company underwriting (denying people based on pre-existing conditions) and claims adjustment (denying claims based on whatever they can come up with) ability will be severely curtailed. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:43pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/85 "2009-09-11T19:43:59Z")
> [@jtgain](#): > > Those two positions are not “dual”, they are identical. The government is able to provide a product that is cheap to the end user while the program is terribly inefficient. > > In other words, the health care is only cheaper in the sense that the direct payment from the end user is less. The overall cost is enormous. Medicaid is virtually free to the user but very expensive to the taxpayer. Yeah except everything I have read says that the public plan will not be subsidized any more than Aetna’s plan will be. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:47pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/86 "2009-09-11T19:47:53Z")
> [@mazinger\_z](#): > > The point is that the public option, run at a loss, is going to take more money to bail out. For example, look at the medicare cost projections, and look at what happened to the previous projections – they were off by a factor of 10. How will the spending stop? Until we know more specifics, this is one major issue that any UHC or public option plan must address. Yeah, except that the public option cannot run at a loss. They have to break even or raise their premiums. The government cannot subsidize the government plan any more than it subsidizes the private plans on the exchange. IRhgt now under medicare part C the government pay 12% MORE for private plans than it does for regular medicare. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:49pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/87 "2009-09-11T19:49:24Z")
> [@jtgain](#): > > And if there is a shortfall, and the program doesn’t look like it will survive, will it: > > 1. Raise premiums > 2. Raise taxes > 3. Cut benefits > 4. Borrow money from the treasury to sustain the program. > > And here’s a hint: When a crunch comes, private insurers can’t do #2 or #4. Who has the advantage? And the government plan cannot either. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:51pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/88 "2009-09-11T19:51:24Z")
> [@jtgain](#): > > I think that you are being deliberately obtuse. Let me say it again: > > Definition #1. Private Insurance (U.S. Version)–primary method to pay for all forms of health care > > Definition #2. Private Insurance (rest of world)–supplemental secondary insurance to pay for minor things not covered by government UHC plan. > > You use definition #1 and switch to #2 and back and forth again. > > I understand that private U.S. companies could switch from 1 to 2. What I am saying is that this plan is being sold as “keep your private insurance if you like” knowning that people are thinking of #1 while you are hitting them with #2 from the back end. Take a look at the Israeli model. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 7:56pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/89 "2009-09-11T19:56:13Z")
> [@jtgain](#): > > Let’s start again. Do you feel that Obama is being truthful, accurate, and not intentionally or accidentally misleading reasonable people when he says that “if you like your health care plan, you keep your health care plan” under his proposed system? I guess he could caveat it iwht 15 minutes of if, and or buts, however essentially he is being truthful and accurate. I guess he could also point out that if your current insurance company is less efficient than a government run plan then it will have trouble competing with a government plan on a level playing field where the only advantage the government plan has is the lack of a profit requirement to shareholders and the lack of outsized executive compensation… but thats more than a soundbite. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:06pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/90 "2009-09-11T20:06:34Z")
[quote=“magellan01, post:45, topic:509411”] I think he said about 20% right off the top./QUOTE] 20% is the total average overhead of health insurance companies. This includes stuff like underwriting and claims adjustment which insuranc ecompanies won’t have to do anymore. The government overhead is about 3%. The main government advantage is going to be the lack of a profit motive (and the executives will probably be paid less than their private company counterparts). ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:10pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/91 "2009-09-11T20:10:09Z")
> [@magellan01](#): > > I think what we have is a situation where there is not enough competition. I do like the idea of allowing the companies to compete across state lines. Why not? Plus, if I moved, then I can take my insurance with me. You do realize WHY insurance costs more in NYC than in Billings Montana right? The insurance companies have to pay more in NYC so they charge NYC residents more. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:15pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/92 "2009-09-11T20:15:48Z")
> [@magellan01](#): > > I don’t know of anyone who is a fan of doing nothing. For the last few decades the Republican party line seemed to be: There is nothing wrong with our health care system. It is the best health care system in the world, why would you want to mess with it. Now that almost everyone thinks there is a problem (except perhaps Republicans), their mantra seems to be Medicare is awesome and noone should mess with it but government healthcare sux. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [September 11, 2009, 8:22pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/93 "2009-09-11T20:22:29Z")
> [@col\_10022](#): > > …(and the executives will probably be paid less than their private company counterparts). Regretably, I believe that the 2009 SDMB Thundering Understatement of the Year Award nominations are already closed. A pity. I appreciate your effort, above, to provide some insight into the question of whether or not “recissions” are a crucial part of any insurance companies business. Your suggestion that it is the result of competitive pressure is apt, but leaves a bit unanswered. Are you saying that this competitive pressure is an issue of survival, or merely compartative profitability? See, what I’m struggling to find out is: can insurance companies survive and return a modest but reliable profit without such reprehensible practices? Are there any such firms who refuse to soil themselves? How do they make out, comparatively? I suspect, but cannot prove, that we don’t know and cannot find out, that such unpleasant truths are hidden behind a phalanx of lawyers, much like banks will never tell you how much money they gouge for overdraft fees. You seem comparatively knowledgeable, can you offer me the relevent facts, or tell me where I might find them? ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:23pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/94 "2009-09-11T20:23:17Z")
> [@magellan01](#): > > Can you point to anyone who wants things to stay as they are? Not ANYMORE but you either have a really short memory or a very selective one if you don’t remember the Republican party line on health care reform: Get rid of the lawyers and we’ll be fine. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:33pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/95 "2009-09-11T20:33:01Z")
> [@Leaper](#): > > As an aside, I hear the Republicans claim that they have a plan or three of their own. I think this is a good thing; it allows the voters to gauge their seriousness, and to hear what they think the flaws in the system are. I look forward to hearing what they are. According to a conservative newspaper, these are from the House (and you get all sorts of whackos in there): H.R. 77,109, 198, 270, 321, 464, 502, 544, 917, 1086, 1118, 1441, 1458, 1468, 1658, 1891, 2520, 2607, 2692, 2784, 2785, 2786, 2787, 3141, 3217, 3218, 3356, 3372, 3400, 3438, 3454, and 3478. I suspect that a lot of these are variations of one or two real proposals, I suspect that there are a lot of half cooked cockeyed schemes that were written for them by some right wing think tank and I suspect that others give lip service to being about health care reform but are really about getting a new road built in their district or something like that but there are a bunch of bills. judge for yourself if any of them are worth the paper they are written on. I read a few of the more prominent ones and I think despite the disingenuous impetus for their ideas, Republicans are trying really hard to come up with some reasonably good ideas. Eventually with enough thought they will end up where Obama is right now but they will slap a different label on it (because frankly Obama’s plan is about as close to what the Republicans want while still doing some good. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:47pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/96 "2009-09-11T20:47:37Z")
> [@Kimstu](#): > > You’re looking at a pretty minuscule percentage of the costs of the overall problem, though. According to [this article](http://www.cleveland.com/nation/index.ssf/2009/09/would_tort_reform_make_much_di.html), > > In short, the tort reform that the right seems to be advocating as one of a handful of improvement strategies would at best affect only a few percent of total health care costs. > > Sounds a bit like putting a band-aid on a sucking chest wound because, hey, although it’s not going to solve the overall problem, it will at least help to reduce **some** of the blood flow. Yeah, you can argue that every little bit helps, but if the bit’s as little as all that, is it really worth advocating it as a significant part of the solution? Yeah, tort reform is like a bandaid on a guillotine wound but if its that frikking important to them, lets give it to them as part of the package of comprehensinve health care reform and see how serious they really are or if they come back and try to strip everything BUT the tort reform. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 8:49pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/97 "2009-09-11T20:49:37Z")
> [@jtgain](#): > > Please read my previous posts. I never said that insurance companies have any rights to continue to have their profit margins. > > My contention was with Obama’s claim that private insurance will continue to thrive as is, and I contend that is incorrect. Please cite where Obama claims that private insurance companies will continue to thrive. He said if yu like your current insurance you can keep it, noone is going to force you to switch to a public option. If private insurance companies can’t compete with a public option on a level playing field (minue the profit motive) then why do we need them? ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 9:20pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/98 "2009-09-11T21:20:53Z")
> [@BwanaBob](#): > > I believe the tort reform isn’t to just lower the cost of malpractice insurance. It’s to reduce costs by not having the doctor have to request 12 tests performed to cover his/her ass when in reality 1 or 2 tests would suffice. This bloat is a big money gobbler. First can you cite how much of a money bloat accounts for? I don’t doubt its some measurable amount but tort reform doesn’t mean you can’t sue ytor doctor. It usually mean you are limited in how much you can get for stuff like pain and suffering and other special damages. They are still liable for economic damages due to negligence and they will still order those tests or at least most of them. The indirect effects of tort reform are grossly exxagerated and the reason they are grossly exxagerated is because the direct effects of tort reform have been so mild. In the last 10 years we have seen several states institute tort reform and we have seen the overall amount of claims rise about 8% during a 10 year period. Not bad. The amount paid in med mal premiums has doubled in those ten years. In states like Texas and Virginia where they have passed tort reform the size of awards have dropped and the cost of med mal insurance has also dropped and perhaps this is a good idea to implement everywhere but what has NOT dropped significantly is the number of tests being ordered. The CBO has estimated the cost of malpractice claims (including defensive medicine) at about 2% of combined health care costs, that’s right the biggest (and for many the ONLY) health care issue for the right is worth 2% of health care costs. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [September 11, 2009, 9:50pm UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/99 "2009-09-11T21:50:57Z")
> [@elucidator](#): > > can insurance companies survive and return a modest but reliable profit without such reprehensible practices? Yeah of course they can but the premiums might have to go up. The thing a lot of people do not understand is that insurance is not a lottery so much as it is a societal savings plan. Insurance is merely a way to shift and distribute risk. Insurance companies cannot pay out more than they charge in premiums (plus the interest thereon). So in an ideal world the present value of the premiums you pay should equal the present value of your lifetime medical costs. Some people will develop some terrible disease and will “win” the insurance game by paying the same premiums they paid when they were healthy and get medical care for their disease for years and years and years and some people will “lose” the insurance game and live a long healthy life paying premiums the whole way. Insurance companies use actuarial science and the law of large numbers to predict how much a large group of insureds is going to need consume in medical care. This is not an ideal world so for every dollar in premiums you pay you can expect to receive a present value of about 80 cents worth of medical care (20% goes to overhead and profits). If we get rid of underwriting and claims adjustment and stuff like that then you can expect the overhead to drop to 10% or less (medicare only has a 3% overhead and other than executive compensation and advertising, there is no reason why a large insurer cannot achieve similarly low overhead). Of course premiums might increase for some people because now we have to cover the people who actually get sick but like you said, what’s the point if we don’t do that. My problem with this whole debate is that people are focusing a whole lot on the uninsured and not nearly enough on the fact that health care costs are going to consume ourt budget within a few decades. Everything is rationed and allocated. The free market allocates goods according to ability and willingness to pay. As a society we have decided that medical care is not one of those things that we want to have distributed solely on the ability to pay. So the government has to subsidize the medical care of those who do not have the ability to pay. The big question for me is how much health care should people be getting on the government dime and how do we bend the cost curve so that medical costs don’t continue to increase at higher than our rate of economic growth. ---
**Author:** ![elucidator](https://avatars.discourse-cdn.com/v4/letter/e/8edcca/32.png) [@elucidator](https://boards.straightdope.com/u/elucidator)\ **Post date:** [September 12, 2009, 5:57am UTC](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411/100 "2009-09-12T05:57:18Z")
If our population of worker-bots is twenty percent healthier, how much positive economic impact might we reasonably expect? And if this stuff is going to get more expensive, isn’t it even more important to be equitable about it? There are privileges of income I am grudgingly willing to accept, life and health are not on that list. Sometimes we are forced to desperate measures, like Doing Stuff Different. Even without being entirely sure as to the outcome. [Previous page](https://boards.straightdope.com/t/would-a-public-option-force-insurance-out-of-business/509411.md?page=4)