Public Option Could Increase Competition Amongst Private Health Insurers

One of the many arguments critics are using against the proposed health care reform legislation is that a public option would kill competition in the private health insurance market. However, a recent study found that private health insurers, themselves, are actually already accomplishing this task in many parts of the U.S.

For example, in Maine the lack of competition amongst private health insurers is non-existent. In fact, according to the American Medical Association, one health insurance company, WellPoint Inc., accounts for 71% of the Maine market with Aetna holding a 12% share. Republican Senator, Olympia Snowe, stated: “there is a serious problem with the lack of competition among insurers”. Maine is indeed one of the highest-cost states for insurance premiums.

As the system currently operates, just a few insurance companies hold the majority of the market in their control: a monopoly, in essence. These monopolistic conditions drive up the premiums paid by employers and individuals. A government plan could restore the competitive balance, forcing private health insurance companies to maintain lowered (and more reasonable) premiums to keep up with a public option. A study by the Urban Institute public policy center estimated that a public plan could save taxpayers $224 billion to $400 billion over 10 years by lowering the cost of subsidies for the uninsured, while also preserving private coverage for those who choose to keep their current health insurance.

Nevertheless, private insurers continue to argue that market conditions are already competitive and that a public option is unnecessary.