The Public Option: Sorting Rhetoric from Reality

Third, how generous are the benefits to be offered by the public plan? The two key issues with respect to benefit plans are the premium price and the portion of the premium paid by the individual. Members of Congress have suggested that the uninsured (and to some extent everyone with insurance) should have benefits comparable to those enjoyed by federal employees and members of Congress. In fact, there is no standard benefit plan offered to federal employees. They have a range of choices with varying costs. Premiums range from $297 to $535 each month ($3,564 to $6,420 annually) for an individual policy, which is similar to the premiums paid by people working for large employers.

Premiums may be determined on the basis of experience -- that is, the expected costs of paying for health care for everyone with the same policy -- or on the basis of the average cost of providing services in the community (known as community rating). In general, for smaller groups, experience rating will result in higher premiums than community rating. And higher premium costs will cause fewer people to elect to enroll, unless Congress decides to subsidize the purchase of policies.

Could Subsidies Aid Public Plan, Crowd Out Private Insurance?

Federal employees pay about one-third to one-fourth of the total premium cost, which is slightly more than the average for those who work for large employers. If subsidies are available to help offset the cost of premiums and these subsidies are only available to people enrolling in the public plan, this would give the public plan an unfair advantage over private insurance plans.

Until these decisions are made, it is premature to draw conclusions about the likely impact.

Elizabeth A. McGlynn is associate director of health programs at the RAND Corporation, a nonprofit institution that helps improve policy and decision-making through research and analysis.

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