The Cost of Not Having a Public Option

Private insurance premiums for employer-sponsored coverage will rise by 94 percent by 2010, on top of the 119 percent increase since 1999, according to the Commonwealth Fund report. The increases in premiums from 1999 to 2008 were four times greater than the rise in family incomes, even prior to the current recession.

"These findings are merely the shocking state of premiums, not even including a concurrent jump in out-of-pocket costs for deductibles, co-pays, and other fees. It's no wonder that medical bills now are the leading factor in 62 percent of bankruptcies, and half of American families are rationing medical care because they can't afford it," noted Deborah Burger, RN, co-president of the 86,000-member California Nurses Association/National Nurses Organizing Committee.

Health insurance is already becoming unaffordable for families and businesses, with premium inflation outpacing wage increases. Between 1999 and 2008, employer family health insurance premiums rose by 119 percent, while the median family income rose by less than 30 percent. As a result, average family premiums for group policies have risen from 11 percent to 18 percent of median family income. And if Congress fails to pass health reforms that control health care costs, premiums are projected to rise to 24 percent of a family's income by 2020. (Click on image at right to open chart.) In any economic climate, but especially in today’s recession, most families cannot afford to devote a fourth of their income to insurance coverage, nor can businesses afford their share of insurance premiums in addition to raises for employees.

In light of this reality, it is important to remember the principal goals of comprehensive health reform: 1) to cover the uninsured, 2) to enhance the affordability of insurance coverage for everyone, and 3) to slow the rise in health care costs. Achieving the first goal without the second and third is a recipe for long-term failure.

The Public Plan: The Leverage to Set Rates

Although the Obama Administration may be scaling back its support for a public plan, Commonwealth Fund and Congressional Budget Office (CBO) analyses show that offering a strong public health insurance choice as well as private plans through a health insurance exchange will help all Americans, not just the uninsured, by slowing the growth in premiums. A recent Fund analysis found that offering a public plan alongside private plans to all individuals and employers is our most effective weapon in combating health care costs. The study found that cumulative health system savings between 2010 and 2020—compared with projected trends for that period—could be as high as $3 trillion if reform includes a public plan that adopts innovative payment methods that reward value and uses its purchasing leverage, along with a reformed Medicare program, to control costs. The annual growth rate in health system spending would fall from 6.5 percent to 5.2 percent – consistent with an industry coalition pledge to slow spending by 1.5 percentage points annually over the next decade.

The CBO estimates that a public plan premium would be 10 percent lower than those of typical private plans offered in an insurance exchange—a cost break that would provide much-needed relief to families and businesses in every state in the country. The average family would save $2,200 per year by 2020 with reforms that include a public plan. President Obama pledged during the presidential campaign to save American families $2,500 a year through health reform. This goal needs to be on par with a deficit-neutral health reform plan.