Ok, over the past year or so I admit I've been my own little crusade to argue that the final Health Reform Bill isn't necessary as horrible and useless without a Public Option, as many have commonly stated.
I've tried a variety of approaches, some successful -some not so successful. Today I'm putting this issue to bed, one way or the other. End. Done. FINITO.
The Core of my argument has been a little known provision involving the Office of Personnel Management contracting it's own unique set of Health Insurance plans which was put into the bill as a Replacement for the Public Option.
What apparently has caused some people's blood to boil is my suggestion that this Replacement is "basically the same, and just as good as the PO".
My source? The CBO Report on the Senate Bill when this provision was introduced.
This estimate incorporates the effects of the manager’s amendment, which would make a number of changes to the Patient Protection and Affordable Care Act as originally proposed. The changes with the largest budgetary effects include: expanding eligibility for a small business tax credit; increasing penalties on certain uninsured people; replacing a "public plan" that would be run by the Department of Health and Human Services (HHS) with "multi-state" plans that would be offered under contract with the Office of Personnel Management (OPM);, deleting provisions that would increase payment rates for physicians under Medicare; and increasing the payroll tax on higher-income individuals and families. Of the total deficit reduction of $132 billion projected to result from the legislation, the manager’s amendment accounts for about $2 billion, and the act as originally proposed accounts for the remaining $130 billion.
The question is - Am I Right or Am I Wrong?
That's where you guys come in. If you can show me and confirm, that the OPM Replacement does not help cut premium costs the way the Public Option would have - I WILL DROP THIS ISSUE PERMANENTLY.
I promise.
I mean, my ego isn't on the line here - I don't care if people prove me wrong. I would rather if I am wrong, to know it and stop wasting my time tilting at this particular windmill anymore.
The thing is, If I'm Right then a lot of people need to do the same as I will if I'm shown to be wrong and accept the truth.
I will, if you will.
Feeling up for a challenge? Then join me over the flip.
A couple days ago on the issue of the PO Replacement, we've had a very productive if contentious debate of it in this portion of the thread.
Feel free to review this portion of the discussion to see where things are.
In summary, the argument has been made that I'm mistaken, lying, talking about the wrong version of the legislation, am confusion this with "Co-ops" and/or the Exchanges, that the CBO thought this option was "Nothing" and completely ineffective, or that I'm misunderstanding the difference between the bill's impact on the deficit and it's impact on premiums.
Despite all that one commenter the other day who initially and angrily doubted my claim about the PO Replacement found confirmation that I was right. when Heritage Called the OPM Replacement a "Public Option"
Under the Patient Protection and Affordable Care Act (PPACA),[1] the federal government, through the Office of Personnel Management (OPM), is legally required to sponsor at least two national health insurance plans beginning in 2014.[2] These OPM-sponsored plans would automatically be eligible to compete against private health insurance offered in the new health insurance exchanges to be established in every state.[3]
It Creates an Uneven Playing Field. Former OPM Director Kay Cole James notes that “OPM would not merely serve as the umpire overseeing competition among private health plans. It would also become a health-plan sponsor, fielding its own team of players to compete against the existing private plans in every state.”[9]
OPM-sponsored plans would thus have an exclusive franchise: They would be perfectly poised to compete nationwide; they would be subject to OPM-negotiated determinations for medical loss ratios, profit margins, and premiums; they would have their own standards for state certification and solvency requirements. This clearly gives the OPM-sponsored plans special advantages.
It Creates the Foundation for a “Robust Public Option.” In their authoritative taxonomy of PPACA, Kaiser Family Foundation analysts categorize the OPM-sponsored health plans as “the Public Option.”[10] Original proponents of a “robust public option”—a government plan that would base provider payments on Medicare rates—viewed it as an ideal vehicle to undercut private health plans and ensure a rapid evolution toward a single-payer system. With the creation of this “OPM alternative,” advocates of a “robust public option” have a second chance to crowd out private health insurance and secure their original policy goals.[11]
Some discredited this because it comes from Heritage, which is clearly a dubious source, and I would agree with except that Heritage was just repeating what the Kaiser Foundation had already said about the Impact of the Law and they also referred to it as a
Public Plan Option (pdf).
Public plan option • Require the Office of Personnel Management to contract with insurers to offer at least two multi-state plans in each Exchange. At least one plan must be offered by a non-profit entity and at least one plan must not provide coverage for abortions beyond those permitted by federal law. Each multi-state plan must be licensed in each state and must meet the qualifications of a qualified health plan. If a state has lower age rating requirements than 3:1, the state may require multi-state plans to meet the more protective age rating rules. These multi-state plans will be offered separately from the Federal Employees Health Benefit Program and will have a separate risk pool.
The primary benefit of the Public Option was it's ability to drive down overall costs via competition - however, I can't really say this was guaranteed in any particular version of the ACA. There are many reports that indicate that premiums for the Public Option would have been higher than that of private care.
From TPM.
Health care reformers have a number of arguments for the public option, but the main one is this: that by injecting fairness and competition into the market the public option will lower premiums for everybody, including those paying for private plans. Unfortunately, a new CBO study finds that it may not have that effect at all.
in an analysis of House health care legislation, the CBO concluded that the six million people expected to enroll in the public option by 2019 will be paying, on average, higher premiums than will people buying private plans.
"[A] plan paying negotiated rates would attract a broad network of providers but would typically have premiums that are somewhat higher than the average premiums for the private plans in the exchanges," wrote CBO chief Doug Elmendorf.
Now admittedly this was an analysis of the House version of the bill which didn't enter the final legislation with it's "Robust Public Option" in the end.
Ironically the "weaker" PO from the Senate HELP Bill actually did more to bring down costs.
The CBO recently published a new letter on health care reform. They were asked to evaluate the impact of the weak (level playing field) public option in the Senate HELP committee's bill. Their conclusion was that the competitive pressure from the public option “would probably lower private premiums in the insurance exchanges to a small degree,” and with a public plan in the exchange “the costs and premiums of competing private plans would, on average, be slightly lower than if no public plan was available” By reduc[ing] the cost of buying private insurance on the exchange, a public plan, “would tend to lower federal subsidy payments through the exchanges.”
So
this was the Holy Grail right here. The "Betrayal" I spoke of earlier this week (whether you agree with that meme or not, I do think a LOT of people feel tricked and betrayed by the Administration on this issue, torture, DADT and many other issues) stems first and foremost from the feeling that passing a Health Reform Bill without the impact predicted here - is nothing more than a
big giveaway to Big Insurance the same way that the Medicare Prescription Drug Bill without the ability to negotiate for better prices was.
I don't begrudge anyone's feelings on this matter - I just think we should be working based on the facts first, then see how you feel about it later, ok?
The core of my counter claim hinges on whether the OPM Replacement also manages to provide the same kind of downward pressure, and so far I haven't seen any specific documentation indicating that it wouldn't.
Until now.
Via The Hill.
A feature of Senate Democrats' healthcare bill that would allow the federal government to negotiate national insurance plans with private providers may not produce the savings its proponents anticipate.
That plan -- the costs of which will depend wholly on future years' budgets -- is unlikely to "substantially change" most Americans' monthly premium costs over the long term, the Congressional Budget Office revealed last week.
Democrats decided to write the new mandate for the Office of Personnel Management into their healthcare bill after talks over the public option collapsed.
Their substitute plan would require OPM to solicit bids for multi-state insurance packages, in the hope that the bidding process would prove competitive enough to lower healthcare costs across the country.
This would seem to essentially end the matter - there is an Replacement "Public" Option, but it's too weak to do what was expected.
Ok, fine, I'm done. That's it.
Except for this...
The Robust Public Option from the House that most people really wanted also didn't bring down premiums either and me being the "Show Me" person that I am, I wanted to read what the CBO said about this directly rather than what someone claims they said. Maybe you aren't, but I'm funny that way.
And unfortunately, I can't find this report. The article didn't link to it. The article was published in December of 2009, months before the final bill was signed and I can't locate what The Hill is talking about. Maybe I'm just incompetent- I don't know. I know I'm not perfect.
What I do have from the CBO Premiums comes from my original CBO source on the Manager's Amendment which originally introduced the OPM Option.
This analysis also reviews the main changes included in the manager’s amendment,examines the longer-term effects of the legislation on the federal budget, and assesses the effects of the manager’s amendment on health insurance premiums
Effects on Health Insurance Premiums
On November 30, CBO released an analysis prepared by CBO and JCT of the expected impact on average premiums for health insurance in different markets of the legislation as originally proposed.10 Although CBO and JCT have not updated the estimates provided in that letter, the effects on premiums of the legislation incorporating the manager’s amendment would probably be quite similar. Replacing the provisions for a public plan run by HHS with provisions for a multi-state plan under contract with OPM is unlikely to have much effect on average insurance premiums because the existence of that public plan would not substantially change the average premiums that would be paid in the exchanges.11 The provisions contained in the manager’s amendment to regulate the share of premiums devoted to administrative costs would tend to lower premiums slightly, and the provisions prohibiting the imposition of annual limits on coverage would tend to raise premiums slightly.
I've been saying this essentially from the beginning because this was my original source.
It's also fair for me note that the CBO wasn't exactly all sure what would ultimately happen and they may have just been punting on this issue as they seem to do here in the Manager's Amendment Report.
Whether insurers would be interested in offering such plans is unclear, and establishing a nationwide plan comprising only nonprofit insurers might be particularly difficult. Even if such plans were arranged, the insurers offering them would probably have participated in the insurance exchanges anyway, so the inclusion of this provision did not have a significant effect on the estimates of federal costs or enrollment in the exchanges.
But here's the thing, if they thought the OPM Replacement wouldn't be implemented as some have suggested, then why didn't they increase their premium projections for plans offerred in the Exchange and in the general private market?
Since they didn't do that, I have to suppose they basically figured that the threat of such a plan being formed might have the same effect that the threat of HilaryCare had on Health Insurance Premiums during the 90's, where the rate of Medical inflation dropped to just 3% per year even though they didn't even pass a bill. History has shown that just threatening a plan like this or HillaryCare which didn't even have any kind of Public Option at all can sometimes have a big impact on the industry. But then again, that's a ton of supposition on my part. Bottom line: whatever the reason, they didn't at this time substantially upgrade their premiums estimates for the ACA without the PO.
But my next question is did the CBO change it's assessment later or not?
The CBO Report on the Managers Amendment was Dated December 19, 2009 and the Hill Report was December 23. So did the CBO change it's view in just 4 days, or is it possible the Hill Report is just wrong?
So I looked once again, and decided to focus on the CBO Final Analysis of the ACA as it was signed into law
Effects on Health Insurance Premiums. Under PPACA and the Reconciliation Act,premiums for health insurance in the individual market will be somewhat higher than they would otherwise be, CBO and JCT estimate, mostly because the average insurance policy in that market will cover a larger share of enrollees’ costs for health care and provide a slightly wider range of benefits.8 The effects of those differences will be offset in part by other factors that will tend to reduce premiums in the individual market; for example, purchasers in that market will tend to be healthier than they would have been under prior law, leading to lower average costs for their health care. Although premiums in the individual market will be higher on average, many people will end up paying less for health insurance—because the majority of enrollees purchasing coverage in that market will receive subsidies via the insurance exchanges.
Premiums for employment-based coverage obtained through large employers will be slightly lower than they would otherwise be; premiums for employment-based coverage obtained through small employers may be slightly higher or slightly lower.
Overall, this really IMO isn't that much different from what CBO had previously said about the House and or Senate PO's. Premiums in the exchange would be slightly
higher because of it's greater coverage, while premiums outside the exchange would be slightly lower due to the competition of the Exchange - containing either the OPM or PO plan - themselves.
People may disagree with that, and I can respect that difference of opinion but I still wonder: Is this final result because of the OPM Option or not?
Well, I frankly don't know because the final CBO report doesn't even bring it up.
It's not even discussed. At least couldn't find any mention of it with a PDF search.
So I went back to CBO.gov yet again and found this Selection of Publications on the Health Care Legislation 2009-2010.
Members have also requested information about the effect of the legislation on health insurance premiums. On November 30, 2009, CBO released an analysis prepared by CBO and JCT of the expected impact on average premiums for health insurance in different markets of PPACA as originally proposed.11 Although CBO and JCT have not updated the estimates provided in that letter, the effects on premiums of the legislation as passed by the Senate and modified by the reconciliation proposal would probably be quite similar.
This shows that there wasn't an update after November 30th report, therefore the Hill Report IMO is probably either bogus or simply wrong, and the impact on premiums with the original PPACA which included the Public Option and the Final PPACA that has the OPM Replacement Didn't Change That Much.
This is exactly what I said originally. It seems to me that on the CBO consistently and repeatedly confirms what I said, Kaiser confirms what I said, even
Heritage confirms it - while the Hill Report says what many progressive critics of the ACA claim but that, from what I can tell, just seem to simply be
wrong.
Now, if someone can confirm and verify that Hill Report and explain why Kaiser, multiple CBO reports and even the Heritage Foundation continue to claim that the OPM Replacement did NOT remove the downward premium pressure that the Public Option was slated to have - then I'm more than willing to admit I was wrong all along and will drop this issue for good. Permanently. Forever.
Until then, I'm sticking with it.
Your serve.
6:18 PM PT: Ok, I think I may have figured out what's up with the Hill Report and where I may have been confused. They were refering to the November 30th Estimate where it said about the OPM replacement....
Replacing the provisions for a public plan run by HHS with provisions for a multi-state plan under contract with OPM is unlikely to have much effect on average insurance premiums because the existence of that public plan would not substantially change the average premiums that would be paid in the exchanges.
When I've read this I always interpreted it as say the existence of "A Public Plan" wouldn't change the premiums compared to their other projections, but they said "THAT" Public Plan wouldn't change things much whereas they had said that the Senate HELP PO would.
with a public plan in the exchange “the costs and premiums of competing private plans would, on average, be slightly lower than if no public plan was available”
The reason they didn't bring up the OPM plan is that it just didn't make a difference, and all these effects are achieved by the Exchanges themselves...
The effects of those differences will be offset in part by other factors that will tend to reduce premiums in the individual market; for example, purchasers in that market will tend to be healthier than they would have been under prior law, leading to lower average costs for their health care. Although premiums in the individual market will be higher on average, many people will end up paying less for health insurance—because the majority of enrollees purchasing coverage in that market will receive subsidies via the insurance exchanges.
They're actually are confirming that premiums in the individual market will be slightly higher and the OPM - in their opinion - would have little effect one way or the other since they basically presume there would be few if any contracts actually signed to implement these plans.
So Where I'm coming down on this after going over it and over it, is that the replacement plan does exist, CBO isn't a fan of it one way or the other and isn't really sure what it will do so they just don't consider it in their calculations, but Heritage is deathly afraid of it, which is a good thing.
In the future I probably won't be citing this or making a big fuss about it because where we stand is CBO throwing up their hands while Heritage cowers in fear of the OPM. In the end it all depends on what the OPM actually does with this power and whether they actually do begin building some of these multi-state contracts and they manage to establish an MLR of 90-95% and premium rates that are comparable with Medicare rates, which I admit is a long shot because Medicare underpays it's providers, but could still happen. It's all on the shoulders of the Director of OPM whoever that ends up being.
The worse case is nothing happens (CBO's guess) and best case is this becomes something very much like the (weak) Senate/HELP PO. In the end we'll see. I might not bring it up until 2014 and we actually see what starts to happen.
Fri Jul 22, 2011 at 10:42 AM PT: Ok, Final Answer - and I'm posting this so I can come back and look at it in the future - to the question of "Is the OPM Replacement as Good as the Public Option" - is that it's basically impossible to tell.
The first problem is that there were several different Public Options.
The first House Version from HR3200 was very much like Medicare Part-E where HHS would establish a new plan using their own staff with payment rates and premiums that would pegged to Medicare's rates for the first 3 Years, then be assigned the HHS Secretary. CBO scored that plan has likely having higher premiums than other plans in the exchange.
The Senate HELP Version of the Public Option from HR3590 which the CBO analysed on November 30, 2009 thusly.
CBO and JCT’s analysis of exchange premiums has also taken into account the availability of a public plan through those exchanges in some states. Premiums for the public plan as structured under the proposal would typically be somewhat higher than the average premiums of private plans offered in the exchanges.20
• A public plan as structured in the proposal would probably attract a substantial number of enrollees, in part because it would include a broad network of providers and would be likely to engage in only limited management of its health care benefits. (CBO and JCT estimate that total enrollment in the public plan would be about 3 million to 4 million in 2016.) As a result, it would add some competitive pressure in the exchanges in areas that are currently served by a limited number of private insurers, thereby lowering private premiums to a small degree. By itself, that development would tend to increase average premiums in the exchanges—but a public plan would probably tend to reduce slightly the premiums of the private plans against which it is competing, for two reasons:
• A public plan is also apt to attract enrollees who are less healthy than average (again, because it would include a broad network of providers and would probably engage in limited management of benefits). Although the payments that all plans in the exchanges receive would be adjusted to account for differences in the health of their enrollees, the methods used to make such adjustments are imperfect. As a result, the higher costs of those less healthy enrollees in the public plan would probably be offset partially but not entirely; the rest of the added costs would have to be reflected in the public plan’s premiums. Correspondingly, the costs and premiums of competing private plans would, on average, be slightly lower than if no public plan was available.
Those factors would reduce the premiums of private plans in the exchanges to a small degree, but the effect on the average premium in the exchanges would be offset by the higher premium of the public plan itself. On balance, therefore, the provisions regarding a public plan would not have a substantial effect on the average premiums paid in the exchanges.21
A more recent suggestion of yet another version of the Public Plan, which would initially have it's rates pegged Medicare and gradually allow them it's payment and premiums to rise by 5% per year to meet actually costs was put forward after the Affordable Care Act had already passed in July of 2010.
CBO stated that this plan would have premiums between 5-7% lower, but not that it would have a consistent effect that they had previously described regarding the HELP/PO.
This answer is a bit of a mixed bag. The premiums for the Public Plan itself would be a little bit higher than that of other plans in the Exchange, but private plans in general would be slightly lower.
The Congressional Budget Office (CBO) estimates that the public plan’s premiums would be 5 percent to 7 percent lower, on average, than the premiums of private plans offered in the exchanges. The differences between the premiums of the public plan and the average premiums of private plans would vary across the country because of geographic differences in the plans’ relative costs. Those differences in premiums would reflect the net impact of differences in the factors that affect all health insurance premiums, including the rates paid to providers, administrative costs, the degree of benefit management applied to control spending, and the characteristics of the enrollees (the effects of which would be partly offset by the exchanges’ risk-adjustment mechanisms).
So this is a completely different result than all the others which had been predicted. On the whole CBO found it much easier to offer assessments on what was likely to happen with these various proposals because most of these ideas were based on a known model: Medicare's payment and premium rates.
The OPM Replacement is very different from that. Rather than having it's rates or premiums pegged to Medicare, the Director of OPM has to negotiate for these rates as they currently do with the FEHB programs for Federal Employees. The premiums for those plans tend to track fairly closely to the rates in the employee large market, so I can see how CBO didn't think this plan would influence rates either up or down in any significant way, however the OPM Replacement plan gives the Director a few other tools that aren't available under the FEHBP.
The Director can negotiate premiums, but they can also negotiate MLR Rates and Profit Margins for these plans. These additional Tools are very likely where CBO essentially throws up it's hands because as far as I know, we've never had a plan like that before so their isn't any track record or example for them to build a model upon. Their guess was that most providers wouldn't be able or willing to meet the terms that an aggressive OPM Director might request and therefore these plan might not even come into being.
Rather than indicating that this plan is weak, i think this indicates that it's one of the strongest suggestions out there. Other PO plans don't give anything like this power to HHS. Premiums and rates are either pegged to Medicare and/or gradually rise year by year, in the case of the OPM plan - it's literally anyones guess what the rates and premiums are ultimately going to be and what it might do to impact premium rates in the Exchange or in the overall private market.
In short, they didn't know - no one does and no one will. Not until 2014.