Sebelius: Obama May Look To ‘State Employee Health Plans’ As Model For Competing Public Health Plan

Posted on

"Sebelius: Obama May Look To ‘State Employee Health Plans’ As Model For Competing Public Health Plan"

During yesterday’s confirmation hearing before the Senate Finance Committee, Gov. Kathleen Sebelius (D-KS) suggested that a new public health plan could be modeled on the experiences of state governments that currently offer their employees a choice between traditional private health insurance and a self-insured plan administered by the state:

The President clearly supported a public plan option as he outlined his thoughts about health reform strategy and I think is open to a variety of opportunities to discuss it. I do think it’s important to take a look at what’s going on around the country because clearly there are very successful side-by-side competitive options, as I say, most state employee health plans right now have a public option side-by-side with private insurers. It has not destroyed the market, it has not tilted the playing field, but that’s all about the way the rules are set.

Watch it:

While most critics have characterized the public option as a spin-off of Medicare — it would use Medicare prices and bargaining power — another option is to model the new plan on publicly-owned health insurance plans for state employees. In these self-funded state employee plans, available in more than 30 states, the government operates like an insurance company and competes with private insurance companies.

In their role as self-insured employers, states are responsible for containing costs, promoting quality, and assuring that employees get the benefits and the care they need. Although most states rely, as Medicare does, on third party administrators to pay claims, states are responsible for containing costs, promoting quality, and assuring that employees get the benefits and the care they need.

As the National Association of State Personnel Executives point out, “fully insured products also eliminate the need for a great deal of the customer support, transactional and other administrative functions that the state must provide when they literally become the insurance company under the self-insured model.” Self-funding provides states with greater flexibility, uniformity, and the “ability develop innovative cost containment measures such as aggressive disease management programs and centers of excellence.”

Sen. Chuck Schumer (D-NY), who is working on the public plan option for the Finance Committee, may be considering this kind of compromise. “My goal is to find a plan that would be acceptable to large numbers of senators,” Schumer said in an interview with the Associated Press. “Right now, the private insurers are totally opposed, but maybe there’s room.”

Private insurers are “taking a look at the different state employee plans to get a better understanding of how they operate” and some Republicans may also be open to the option. Responding to Sebelius’ description of an alternative public option design, Sen. Olympia Snowe (R-ME) said, “I appreciate that, and I hope we can continue to have that discussion and conversation and perhaps not solidify in our positions as we go forward on this crucial debate.”

Transcript:

SNOWE: Now getting back to the government sponsored health claims, I know that that is a key issue as we go forward on health care reform and is reminiscent of the debate that occurred on Part D when we were working on developing a prescription drug and there was a fear that there would be a lack of competition among plans for that market. In fact we did create a government fallback in response to that, if an area didn’t have any plans there would be government fallback, there had to be two or more plans to offer competitive prices before the fallback would be kicked in. And it never has, so I think that’s an indication in the number of options that were out there- in fact many people complained that there were too many options to sort through in response to creating, you know, that single greatest initiative since the Medicare program was created. So in looking at the government option, aren’t there better ways to attack that problem? You know, we set up standards in our small business health insurance plan that Senator Durbin, Lincoln, and I have introduced for small businesses health insurance and what we do is set up standards so, you know, it was at least one plan, a standard plan, so there weren’t different rating rules, there weren’t different rated benefits and so on. So there is a possibility of setting up certain standards for private insurers to, you know, insure and guarantee that there is one standard benefit plan that could be offered to consumers rather than opting for a government plan that could ultimately end up being, you know, far more costly, it could end up taking the sickest and the private insurers take the healthiest, I mean the list goes on. I mean, government should be the last resort, not the first, when it comes to something so monumental.

SEBELIUS: Well Senator I share your belief that a competitive market is often the preferable strategy and certainly the competition works far better in most instances than heavy regulation. I do think it needs to be an option that is considered. The President clearly supported a public plan option as he outlined his thoughts about health reform strategy and I think is open to a variety of opportunities to discuss it. I do think it’s important to take a look at what’s going on around the country because clearly there are very successful side-by-side competitive options, as I say, most state employee health plans right now have a public option side-by-side with private insurers. It has not destroyed the market, it has not tilted the playing field, but that’s all about the way the rules are set, and as you say, you know, in your shop bill that you and Senator Durbin and Senator Lincoln have worked on you can construct standards and it may be that at the end of the day the standards are effective enough that the competition from a public plan is not a valuable asset. But I think it’s part of the conversation going forward and something that needs to be looked at.

SNOWE: Well I appreciate that and I hope we can continue to have that discussion and conversation and that, perhaps not, solidify in our positions that we go forward on this crucial debate.

« »

By clicking and submitting a comment I acknowledge the ThinkProgress Privacy Policy and agree to the ThinkProgress Terms of Use. I understand that my comments are also being governed by Facebook, Yahoo, AOL, or Hotmail’s Terms of Use and Privacy Policies as applicable, which can be found here.