COMMENTARY:

Public Option: Insurance Industry’s Trojan Horse

Regulated non-profits to control excessive charges would be a better plan.

As I suggested yesterday, the latest reincarnation of the public option, endorsed by Senate Majority Leader Harry Reid, in all probability will lay out one more circuitous route back into the insurance industry. The Senate plan apparently will follow the lines of an idea originally suggested by Senator Tom Carper, a Delaware Democrat. Today, nobody—journalists, politicans—know the details of this plan. But earlier in October, Carper talked to reporters and, according to an account in TPM, set forth his ideas in some detail.

I think at the end of the day there will be a national plan probably put together not by the federal government but by a non-profit board with some seed money from the federal government that states would initially participate in because of lack of affordability.....

How would it work? First, this won’t be a government run, government funded enterprise. Two, there should be a level playing field so that this non-profit entity that would be stood up would have to play by same rules basically as for-profit insurance companies–the idea that secretary of Health and Human Services [will be] running or directing the operation of this–no way.

We ought to have a non-profit board–it could be appointed by the President but a non-profit board. They’d have to retain earnings, create a retained earnings pool, so that if they run into financial problems later on the financial needs of the plan could be met by the retained earnings

Carper’s plan begins to sound very much like Blue Cross-Blue Shield, long ago launched as a non-profit cooperative that over time turned into a hellish health insurance conglomerate that includes both for-profit and non-profit franchises. (The huge–and hugely loathed–WellPoint is now the largest member of the network.)

Carper and other designers of weak-assed public options like to say “non-profit” over and over again, as if this were some cure to all the ills of the private insurance industry. This is far from the case: As I wrote back in June:

Almost half of Americans with private health insurance are currently covered by non-profit plans. As a whole, they haven’t proven themselves much—if any—better or cheaper than the for-profit insurers....The giant Kaiser Permanente is a non-profit. And while some of them have privatized, many of the Blue Cross-Blue Shields are still non-profits as well—and, in fact, got started as co-ops. Some of these non-profit insurers are well known for paying huge executive salaries and hoarding huge reserves, while charging the same high rates and offering the same rationed care as private plans—and enjoying tax exemption to boot. One report by the Consumers Union found the non-profit “Blues” stockpiling billions in cash even as they raised premiums and co-pays.