I follow the logic of your post from begining to end. I would rather not have a conversation on risk pooling though.. when it was explained to me, and when I was asked to create a very vauge model of it, it had to do with housing insurance and natural disasters. In my opinion that subject is a lot less complicated then health insurance. I will not knock what you said point by point, or even question it because it will lead off onto a tangent that I don't even have time to think about here at work. (And trust me I started to let it go that way, but that resulted in me sitting here a very inturrupted hour)
So I'll just leave it at this, your conclusion is right, it will not operate as a normal insurance company. It will operate as an option people can chose if they don't want to deal with a normal insurance company.
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Originally Posted by Bond
With the assertion that the public option will not be able to operate as a normal insurance company, this now begs the question how will the public option be able to make up the extra capital that is required?
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Valid question, but the answers to your questions are not the only options. There are ways to cut corners on costs and generate revenue to pay for it besides just raising the price or increasing taxes.
(Before I say the following, I'd like to say keep in mind that we've already established that the public option in theory would cost more to run then a normal private insurance company due to high risk, so I'm only looking at the revenue side of things now.)
For one, the government's goal will not be to turn a profit. At this point its very argueable about how much insurance companies really profit, but from every report I've read from 2008 and 2007 the major insurance companies like Aetna, CIGNA, and United health have all gained a profit in the billions.
The government, unlike private insurance, would not have to use advertising. That's not a huge corner cut, but its a corner. I'm sure the government has other tools at its disposal too. I've read articles before that mentioned the government has a large amount of negotiating leverage with drug companies that can allow for some types of discounts.
I'd also say that the appeal of a legitamate plan with less bureaucracy will give it universal appeal opposed to only being appealing to high risk consumers.
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In conclusion, as long as you are fine with taxpayers, who choose not to opt-in to the system, having to bear the brunt (or a significant portion) of this public option, then I have no further issue. But I do hope you find this to be an extremely disturbing prospect at best.
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I don't find it to be disturbing, and I'm ready to accept it even if tax payers eventually take the large majority of the tab. As I've expressed before. But I only see that happening if it does not get very popular, or if it manages to only get popular with people private insurance wouldn't touch or kicked off to begin with. I believe that its a well calculated risk.