Health insurers decry ‘public option’

Two insurance industry heavyweights warned Congress Tuesday that creating a federally run health insurance plan that is open to the American public would destroy the free-market model of employer-provided health care.

In one of the first major opposition statements from the industry during the reform debate, America’s Health Insurance Plans (AHIP), a major trade group, and the BlueCross BlueShield Association, an association of state insurance companies, urged Congress to back off its plans to create a public option.

“A government plan option - in any form - is unnecessary to achieve comprehensive reform and would have devastating consequences on the health insurance coverage that employers and individuals currently have, the federal budget deficit and existing provider systems,” AHIP and BlueCross said in a letter released Tuesday.

The letter, signed by AHIP President Karen Ignagni and BlueCross President Scott P. Serota, was sent to Sen. Edward M. Kennedy, chairman of the Senate Health, Education, Labor and Pensions Committee. The Senate committee’s legislation has an undefined public option as does the House version.

President Obama said in a press conference Tuesday that he supports a public plan as the best way to drive down costs and questioned the theory that the plan would drive private insurers out of business.

“I think there can be some legitimate concerns on the part of private insurers that if any public plan is simply being subsidized by taxpayers endlessly, that over time they can’t compete with the government just printing money,” he said.

“So there are going to be some I think legitimate debates to be had about how this private plan takes shape. But just conceptually, the notion that all these insurance companies who say they’re giving consumers the best possible deal, that they can’t compete against a public plan as one option, with consumers making the decision what’s the best deal. That defies logic.”

The public health insurance option, the most divisive issue in the health care reform debate, is a favored plan of Mr. Obama and most Democrats, who argue that competition is necessary for private insurers to lower costs. But it is a nonstarter with Republicans over concerns that the public option, a government plan to compete with private insurers, would skew the market and drive private insurers out of business.

Mr. Obama, Chief of Staff Rahm Emanuel and the Senate leadership want a bipartisan plan, said Sen. Max Baucus, chairman of the Senate Finance Committee, which is writing one of the bills.

“That’s why I’m confident we’ll get there,” the Montana Democrat said Tuesday after a meeting of a small bipartisan group of committee members, dubbed “the coalition of the willing.”

But not a single Republican would support a public plan, according to Sen. Kent Conrad, a North Dakota Democrat who is touting a co-operative alternative, which would pool insurance customers for coverage similar to energy co-ops in some parts of the country.

“At the end of the day, you have to have an alternative that gets votes,” he said.

Republicans have said they’re interested in the co-op idea but have been reluctant to support it until they hear more details.

Sen. Olympia J. Snowe, Maine Republican, said after leaving the meeting that she needs to see policy’s cost scored by the Congressional Budget Office before she makes a decision but was impressed by the bill’s progress.

The bill’s price tag - originally $1.6 trillion - has come down, Mr. Baucus said. The other sticking points continue to be removing the tax break on employer benefits and costs.

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