HCW Benefits Blog

Contributor:
Steve Byrd, Consultant
Hill, Chesson & Woody

Despite resistance during the initial healthcare reform debate, lawmakers are again talking about a “public option”. This option would allow Americans to choose a government health plan starting in 2014. The bill, introduced in late July, was fueled by a report from the Congressional Budget Office (CBO). The report outlined potential savings of $53 billion from offering a public plan. As well as these savings, the CBO estimates public plan premiums would be lower than the private plan offering by 5-7%. These savings would be largely due to lower medical provider reimbursement scales and administrative efficiencies. Many people however view offering a public option as a first step towards a single-payer system run by the government. This is a concept that is mainly unpopular with consumers but desired by the current administration to address federal budgetary concerns.

Why This is Important for Employers
If the public option becomes reality, it could create some unplanned results in regard to employer healthcare options. A common concern is that forcing medical providers to accept lower payments than those offered through private plans would spur healthcare providers to drop their participation in government networks. One option is to pass a law requiring medical providers to allocate a certain share of their capacity to serving these channels of “insurance”. This would be much like the systems in other countries that practice socialized medicine.

If this occurs, the indirect tax that employers face due to Medicare and Medicaid would worsen. As medical providers receive less from the government-sponsored plans, they would look to private insurers for higher reimbursements to help offset the losses. This would drive up the cost of medical claims and the medical premiums that employers face.

Over time, employers would see their insurance premiums rise at a quicker pace. This would eventually lead to a large number of employers dropping their medical plans and, thus, creating a single-payer system run by the government. Therefore, the key intent to address concerns of increasing costs could backfire, making the public option more of a price accelerant than an extinguisher.

HCW Viewpoint
The availability of a public option would have a significant impact on the number of consumers insured on employer plans. No longer would employers be able to leverage employee benefits to recruit and retain the talent required to give them a competitive advantage. Moving to a single-payer system in other countries has not demonstrated any significant ability to contain costs. Evidence suggests that such a system would not actually lower the cost of healthcare, but instead simply alter the manner in which we finance it.   

For more information on this topic, please visit the following links:

• Proposed Deficit Remedy: The Healthcare ‘Public Option’
• CBO Response to Public Option Proposal
• Public Option Redux
• Reports Show Benefits, Problems with Public Option