One of the more controversial elements of President Obama’s proposals for healthcare reform is “the public option.”
In its basic form, this is a government-funded insurance program designed to enable certain citizens to obtain health insurance while helping inject a degree of competition into the entire system.
In the insurance industry, there are abundant examples of public options that work well. While my experience is in the property-casualty side of the insurance industry, I cannot see why these examples would not extend to health insurance.
Consider personal automobile insurance. Auto insurance is viewed by many to be a social right. Every state where I have done business has a state-sponsored “assigned risk pool” that provides insurance for all but the most dangerous drivers.
Premiums are high and based on driving records, but the depth of availability proves it is affordable. Private insurers peacefully co-exist with these pools, and they often issue and service the policies on behalf of the governmental department that runs the program. So, administratively, it works.
Consider homeowner’s insurance in coastal states. These states’ citizens and legislators view protection from hurricanes as a social right. Some insurance companies provide “wind coverage,” while most rely on state-run Fair Access to Insurance Requirements plans or state-sponsored insurance companies to serve citizens.
In some cases, insurance companies issue and service policies on behalf of the plans. In other cases, the state-run insurers do the job. In a few cases, the private companies actually compete with the state-run companies. Once again, a “public option” works.
In my home state of California, we have perhaps the best example of a working “public option.” Workers’ compensation is not only a social right, it is legally required.
California’s State Compensation Insurance Fund has operated for decades as a backstop insurer of workers’ compensation. Over time, the state fund has expanded to be a very large enterprise and often competes with insurance companies in a state whose workers’ compensation market is larger than the next five states and the federal workers’ comp program combined.
Here, corporate insurers coexist with the state fund in good years and lean. Employers stay or switch insurers based on a variety of factors including service, convenience, financial solidity and price.
As employers, agents and brokers participate in the California workers’ compensation market and discuss provider options, the state fund is mentioned as often and as unremarkably as all the other insurance companies that voluntarily compete in the marketplace. In this example, the “public option” works very well.
As the healthcare debate rages on, there will continue to be the use of catch phrases, often with a great deal of ignorance. A “public option” is neither new nor revolutionary. It is a reality in a number of insurance markets and in states with very diverse needs. These varied public options serve a useful purpose to both employers and citizens.
Little is chief executive of Santa Ana’s Insurance Educational Association.
