Reader Question – Isn't the public option unfair competition?

A reader writes:

Part of the fear corporate America has is that they can’t trust that our government will present a fair competition if they enter a public option into the system. The government makes the rules on what the insurance companies must cover. Are they going to follow those same rules? Will they also follow the state regulations on what insurance must cover? Ex. in-vitro fertilization, etc?

Currently insurance companies must pay a premium tax to the state (Arkansas) for every dollar of premium they collect. That premium tax helps fund state children’s insurance programs (ARKids First). Will the government also have to pay a premium tax? That is part of what increases the rates for private insurance. If the government doesn’t pay that tax, they are already at an advantage.

If the government wants to compete, then they need to do so on a level playing field, which you can never have when only one side makes the rules.

If there is a public option, and even millions more paying at a reduced rate, the remainder of the payers — private insurance — will get hit harder then they do now. As a result, the private payers will be forced out of business…

There are just 4 major carriers in Arkansas. Imagine if the government competition forcing even 50% of current carriers to fold, that’d leave us with only 2 non government options. That would cause even more pressure on the 2 remaining to make up the deficit caused by the government options. It wouldn’t be long until we’d not have anything other than the government option. At that point, would we still have to call it an “option”? It’d be the only plan available so now option to it.

Let me state right off the bat that there is a difference in my describing how things should be, and what a bill says.  Please remember that I am not a politician, nor am I endorsing a bill (or even a version of one).  I will discuss the relative strengths and weaknesses of different approaches, and offer my thoughts on your arguments.  It’s ultimately up to others – and you – to decide what we should do.

So I’m going to tell you what the public option is supposed to do.  I can’t say that every version of the bill will do what I say.  The reader’s first concern is that the rules will be different for the public option and private plans.  No.  That’s not how it should work.  Once the public insurance option is seeded and begun, then it must operate off of premiums.  If it can’t do that, it has to raise the premiums.  It will be under the same rules and regulations.  It has to be a fair fight – including taxes and such.

I disagree that you cannot have competition when one side makes the rules.  Private universities seem to do fine competing with public universities.  Same with FedEx and UPS versus the post office.

As for competition, a study by the AMA, not known for its radical agenda, found that in the majority of metropolitan areas there is a severe lack of competition.  The public option is intended to make sure that competition increases.  It is intended to add another guaranteed option for people in those areas.

As long as these rules are enforced, if it is a fair fight, and private insurance can’t offer the same value for the same price, should they continue to exist?  If they can, I’m all for them.  If they can’t, I don’t understand why we should be forced to pay more.  Do people really have so little faith in the private sector?

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