Premiums for a Public Health Plan: 30 Percent Cheaper?

One of the sticking points emerging in the health reform debate is whether to include a public insurance plan that could either be open to certain groups like the self-employed or perhaps be available to everyone. Now a new study by the Lewin Group spells out how much the premiums for such a plan might be and projects how many people might join.

The good news for consumers: The report estimates that premiums for a public plan would be up to 30 percent less than coverage under private insurance, or about $761 every month for a family, compared with a $970 monthly premium for the same coverage in the private insurance market. Single coverage would cost an estimated $298 a month under the public plan, versus $405 for private coverage. (The figures represent the total premium in each case, including both individual and employer contributions, if any.) Savings like that could be a serious boost for consumers who are struggling to afford health insurance.

Of course, these figures are based on certain assumptions. They project, for example, that the public plan's costs would be lower, since it would reimburse hospitals and other providers at the same rates that Medicare pays—significantly lower than rates paid by private insurers. During the campaign, candidates Hillary Clinton and John Edwards both proposed modeling the public plan on Medicare, but President Obama hasn't been specific about what his administration's public plan might look like. "It's like nailing Jell-O to the wall," says John Sheils, a Lewin Group senior vice president and the study's lead author. "No one's been particularly definite about what they'd do."

But the bigger fly in the Jell-O, as it were, is the fact that a public plan as described in the Lewin Group report might be so attractive to people that they'd move en masse into it, causing heavy trauma to the private insurance market. The report estimates that if the public plan were open to all employers and paid Medicare rates, 131 million people would join it, resulting in a two-thirds drop in the number of people with private coverage. And that's part of the reason that insurers are fighting it, along with others who argue that a public plan is really just a backdoor way into a single-payer system run by the government. In fact, some are beginning to say that disagreement over the public plan could be a deal killer for health insurance reform. Stay tuned.