The Folly of the OPM Plan
From the Department of Looking on the Bright Side of Death. It’s a good thing that the OPM-administered public-option substitute is dead. It would never have worked.
The idea was that OPM—the Office of Personnel Management which administers the Federal Employees Health Benefits Plan, sort of like the HR department for 9 million federal employees—would contract with national non-profit insurers to offer a policy that would be available on the exchanges nationwide.
There are lots of reasons, as Jacob Hacker explains here, that this is not a plausible substitute for a public plan. Mostly the reasons don’t matter anymore, but there is one underappreciated point to make that remains relevant to any proposal that calls for allowing people to purchase insurance “across state lines.”
Health insurance is not just an arrangement between the insured and the insurer. There is a crucial third element to the arrangement, as Bob Laszewski points out: access to a provider network.
Besides buying health insurance to cover expensive health care (pure insurance), what is the most important thing you buy when you buy a health insurance policy?
Answer: The provider network. Without an in-network discount from an HMO or PPO you might pay 30% or 40% more for your health care–in higher premiums or higher out-of-pocket costs. You definitely never want to pay retail at your doctor’s office or hospital.
Beyond the discounts, agreements between providers and health plans also establish managed care protocols that save lots of money and keep the cost of insurance down.
By definition an out-of-state health plan–one that does not operate in a given state–does not have a local network. If it did, it would already be doing business there.
There are some tricky economics in the health care/insurance markets, because transactions in those markets are not simply between buyers and sellers of goods, but are rather complex arrangements between consumers, providers, and payers—not to mention consumers’ employers. That trickiness gives rise to some tough legal issues…a subject for another time.
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