I think that there is a leaps in this portryal. Let’s see if we stipulate the following:

Public plans are more efficient, so they offer lower premiums the sicker you are. They also use fewer utilization management practises (UMPs) than other plans, so they are more atractive to all prospective enrollees.

In any community or in any random subdivision of one, there will be sicker and less sick people in roughly the same proportion with more healthy than sick. And each group will have an estimated aggregate health cost on which premiums are set.

There is no naturally occuring community or random subdivicion comprised only of the sick and therefore no community rated premium that reflects only the sick. So whatever group the PO plan uses to estimate the cost of the premium it will always contain more healthy than sick.

A private plan in attempting to lure the healthy most lucrative enrollees will offer them tailored premiums that are lower than the single premium that the public plan offers all its enrollees. And in the process still extract a profit from them in doing so.

This last must be shown with some estimates at least. With all its built in inefficiencies one can not know that setting lower premiums for healthy prospective enrollees is a profitable strategy. Since by lowering pemiums they lower their profit.

An aside point is why would only 10 of the stipulated 30 million opt for the public plan. Does the CBO feel that the 10 million are all sicker and for that reason will opt for the public plan and the 20 million are all healthy and for that reason opt for the private plan. And if so on the basis of what estimates. They may be arguing from preconcieved conclusions.

Presumably this group will also be the community on which rates are set. So the prevailing rate of the premium will tend to reflect this higher risk.

note quite. here in MA we have modified community rating. each insurance company set it’s rates for each of it’s plans and must then charge the same to all customers for that plan — the only modification is for age, gender, location. but each company sets it’s own rates.

so, to get a premium quote on any/all available insurance plans (each company has more than 1. bcbs, for example had 16 last i looked) including both those in the exchange and those outside it, all i have to do is enter my date of birth, female and zip code and i can easily determine the premium rate i (and any other woman my age living in my community) would be charged.

only the public plan is limited to the exchange. for the tri-committee version of hr 3200 the cbo predicted 30 million in the exchange with about 10 million choosing the public plan although that number is in doubt, it could be lower. private plans can be offered both in the exchange and outside it.

finally, i think it’s “the less restrictive utilization management practices that attracts those with serious illnesses” (from cms report), not premium cost. for people with lots of medical bills, far more important that relatively small differences in premiums are things like not denying claims, low/no deductibles, low max out of pocket limit.

for healthy people, it’s just the opposite. low premium cost is more likely to be the critical issue in choosing a plan.

that is why, without good risk adjustment, there will be incentives to the insurance companies, not to maximize social good, but rather to deny/delay claims and do other things that make people with serious health issues choose another plan.

Sick enrollees have higher medical costs and their premiums will always be lower from a public rather than from a private for profit plan. So they will always choose the former. Net effect, the public plan may not be able to meet these costs from the premiums alone.

The bidding between the public and private plans then devolves over who gets the brunt of the healthy enrollees. Here again the public plan has the advantage. This is because the premiums for this group are set by the prevailing community rate for both the public and private plans. But whereas the public plan is more efficient the private plan will need to charge a higher premium.

The universe of people at play are the currently uninsured and whoever else could opt for the PO, roughly 50 million people. This group is more than likely skewed toward the sick but the preponderance will still be relatively healthy. Presumably this group will also be the community on which rates are set. So the prevailing rate of the premium will tend to reflect this higher risk.

The net effect would seem to be that the public plan loses money on the sick enrollees but gains money on the healthy enrollees, and that these last outnumber the former. But this is how the managing of risk is supposed to work. Further the higher costs in the public plan associated with the sick enrollees may be outweighed by the inefficiency in managing risk by the private plans. It is not easy to know beforehand.

I don’t see the evidence in these comments whereby the premiums in the proposed PO plan is not going to vary according to the risk of the enrollee.

modified community rating not risk rating (also guaranteed issue).

wiki link: Community rating

from the crs:

• Prohibit coverage exclusions of pre-existing health conditions. (A “pre-
existing health condition” is a medical condition that was present before the
date of enrollment for health coverage, whether or not any medical advice,
diagnosis, cares, or treatment was recommended or received before such
date.)

• Require premiums to be determined using adjusted community rating rules.
(“Adjusted, or modified community rating” prohibits issuers from pricing
health insurance policies based on health factors, but allows it for other key
characteristics such as age or gender.) Under H.R. 3200, premiums would
only be allowed to vary based on age—by no more than a 2:1 ratio within
age categories specified by the Commissioner, premium rating areas, and
family enrollment—for example, for single versus family coverage.

• Require coverage to be offered on both a guaranteed issue and guaranteed
renewal basis. (“Guaranteed issue” in health insurance is the requirement that
an issuer accept every applicant for health coverage. “Guaranteed renewal”
in health insurance is the requirement on an issuer to renew group coverage
at the option of the plan sponsor [e.g., employer] or nongroup coverage at the
option of the enrollee. Guaranteed issue and renewal alone would not
guarantee that the insurance offered was affordable; this would be addressed
in the rating rules.)

They could have insurance companies that happily take money from people when they were inexpensive and cheap, but when they get sick they would have a financial incentive to start doing little things that might make someone with an option move across the state line.

I saw one thread here about a guy whose care was 700,000 a year. What if the people in the office were rude to him, what if they were late every time they had a meeting with him, if they showed up at all? If the guy could just switch to the public option by moving over the state line, why not? Why should he put up with that when he is in enough pain already.

People who have expensive health problems might also need other social services. If people left an opt out state to get the public option, the state that opted out would save that money.

Of course all this is just speculation. The same is true when people say no state will turn down the public option. The public option is not the same as a stimulus check.

Whatever the cost of the premiums for the PO plan turn out to be, as a function of the risk of its enrollees, it will need to be paid and for low wage earners government subsidies will defray a portion of the cost.

But there is nothing to preclude the PO plan to charge a lower premium to a healthy enrollee that is comensurate with its risk, than a private plan will charge. That is, a PO plan will always charge lower premiums to enrolles that are comensurate with their risk than will a private plan. The reason is that the comparative cost of covering them for the former is lower than for the latter.

For this reason both healthy as well as sick participants will always choose to the PO plan, if allowed to do so freely.

The two main constitutional arguments against an individual mandate are 5th Amendment Takings and the Commerce Clause (Article 1, Section 8).

Since taxes aren’t a taking, the individual mandate should not be a taking. The Commerce Clause question is a little more interesting. As for current precedent, it’s probably constitutional, but who knows how the Supremes will decide? We’ll find out.

I really missed a lot I guess when I couldn’t access The Seminal for about two months.

yikes! something similar happened to me a couple of times when i couldn’t access fdl (my ip got blocked or something), but rbg fixed me right up. there used to be an email addy for the site admin, but i just went looking for it and couldn’t find it. maybe joh or scarecrow can give us the link in case it happens again.

feed://feralcat.libsyn.com/rss

the interview is oct 10. please let me know if this doesn’t work for you.

glad you like montanmaven’s diaries — i thought they were great too!