Public Insurance Pool, Not a Captive Market
A key component of the American Health Plan is that all Americans, regardless of age, should have access to a pubic insurance pool that bypasses insurers and pays doctors and hospitals directly. Everyone would have their choice of sticking with their existing insurance, if they have coverage, or joining the public pool. For those that opted for the public pool the only thing that would change is the price: the American Health Plan provides a choice of doctors and hospitals, but by cutting out insurer profiteering, comprehensive coverage will be cheaper than the private market.
To realize cost savings, however, the public insurance pool must be truly public. That means, no for-profit health insurance companies. On example of such a public pool is the California Public Empoyees Retirement System (CALPERS). Roughly 300,000 state workers, their dependents and retirees are enrolled in a self-insured PPO program. CALPERS acts as its own insurance company and pays a small fee -- roughly 3% of health care costs -- to Blue Cross to access the company's network of hospitals and doctors. The benefit of self-insuring is that CALPERS has bypassed private market overhead and profit which account for up to 50% of health care costs. Opening the CALPERS pool to anyone wishing to join would benefit the state budget and average consumers because by adding younger and healthier participants, the annual costs for all will decrease.
A similar approach could be provided nationally. Currently, federal employees, including members of Congress and the President, receive their health care from the Federal Employees Health Benefits program (FEHB). However, unlike CALPERS, FEHB does not provide a self-insured option. Instead, enrollees are left to choose between the alphabet soup of private market HMOs, PPOs, POS, etc. Though FEHB does provide some advantages of a group health plan, it misses out on the advantages of a truly self-insured approach that bypasses the high overhead and profit demands of the private health insurance market. FEHB is prisoner to the four major health plans -- WellPoint, UnitedHealth, Aetna and Cigna -- that control 50% of the U.S. health insurance market. Like any cartel, those insurers set rates far above their own costs to guarantee healthy profit margins.
If Congress pursues legislation to open FEHB to any American wishing to join, it should turn FEHB into a self-insured public insurer capable of maximizing our health care dollars. Competition with a low-overhead public alternative will force private insurers to prove that they can be cost-effective while offering similarly comprehensive coverage. Such a plan should also contain provisions allowing Medicare to bulk purchase prescription drugs.