Will California Opt for the Public Option?

Although Vermont became the first state in the union to adopt a public option in healthcare, it may soon have company.  As Vermont Governor Peter Shumlin said when signing the legislation, “We gather here today to launch the first single-payer healthcare system in America, to do in Vermont what has taken too long – have a healthcare system that is the best in the world, that treats health care as a right and not a privilege, where health care follows the individual, isn’t required by an employer –  that’s a huge jobs creator,” Shumlin said.

The enormity of creating a public option hasn’t stopped tiny Vermont, which might seem like an unlikely place for a major revamp of the health insurance system: “By most standards, Vermont’s health care system already is one of the nation’s best. The United Health Foundation has ranked Vermont the healthiest state in the country four years in a row. Fewer than 10 percent of Vermonters lack health insurance, one of the lowest rates in the country.”

And then there’s California.  In a giant warehouse in Alameda, an army of  phone operators are employed by a large health insurance plan, and they’re willing to go the extra mile for their customers. They’ll schedule a doctor who will make home visits, a pharmacist who will drop off a prescription, and even help fill out an application for food stamps.  “We do things for them that a traditional, commercial health plan doesn’t do,” says Ingrid Lamirault, chief executive officer of the Alameda Alliance for Health, a county-run, not-for-profit insurer.

Although the much celebrated, and much maligned, public option may have died in Congress, it’s alive and well in California, which is unique in the nation for having public health insurance plans that are run by its counties.  California’s plans stretch from San Francisco to the Mexican border and cover 2.5 million residents.

The Alameda Alliance for Health — like a private insurance company — has a network of doctors and hospitals and covers 200,000 people in Oakland and neighboring communities.  Much like private health insurance companies, the alliance also runs a managed care plan for Medicaid beneficiaries and additional plans for county workers.   The alliance’s Lamirault thinks this is just the beginning.  In 2014, when the Patient Protection and Affordable Care (ACA) becomes law, millions of Americans will be able to buy coverage through state-based insurance exchanges. In California, government-run public plans, like the Alameda Alliance for Health, will compete with private insurance companies for all those new customers, those who run the county plans believe they can offer a robust network of doctors and hospitals to bargain shoppers looking for affordable coverage. “I think when some people get to make a choice,” according to Lamirault, “having local offices they can walk into and get help with things and get their questions answered, and when they call customer service they get their calls answered in under two minutes. Those kinds of things are important to them.”

California is unique in that many public county systems also contract with private physicians and top-notch research hospitals. They even share the same lobbying group as the big-named insurance companies, the California Association of Health Plans.  Some of those companies don’t have a lot of love for their public brethren. “Certainly, there are some health plans that didn’t like the idea of having to compete with these public plans,” said Anthony Wright, a public plan booster and executive director of Health Access, a Sacramento-based health care consumer advocacy group. “Especially ones that, having come out of the Medicaid program, are used to providing care at cheaper rate.”

Some California insurance companies say they will happily compete on price so long as the public plans do not get preferential treatment.  Doctors and hospitals already accept low reimbursement rates from public plans, often as part of their charity care. That lets the public plans keep their premiums low, although private plans say they are charged higher prices.

The preferential treatment is not likely to last beyond the 2014 opening of the exchanges in California to people with higher incomes, the government-run plans will have to pay providers more than they do now, according to Sumi Sousa, officer of policy development at the San Francisco Health Plan. Sousa says the belief that public plans always cost less just isn’t true. “Some commercial providers, because they’re so large, they’re able to spread their cost over a much broader network,” Sousa said. That’s not the case for many county-run health plans in California, which are quite small.  Still, says Sousa, the public plans do have low overhead: Executives earn a fraction of the salary paid to the big CEOs, and they have no stockholders.

Additionally, the public option is likely to be on California’s 2012 ballot.   Jamie Court, executive director of Consumer Watchdog, a Santa Monica-based consumer advocacy group, plans to put an initiative to add a state-run healthcare public option on the ballot. Opponents say the initiative doesn’t improve the way healthcare is delivered and paid for.  Despite critics, Court says he’ll push forward on his plans to circulate a petition to the public.  “We believe the premium regulation is definitely something that Californians overwhelmingly favor, and we think the public option is something that they still favor,” Court said.  Court has written that health insurance requirements are a motivating force for the initiative: “By 2014, all of us will be required to buy health insurance or face tax penalties. The problem is that health insurance companies can charge whatever they like and raise premiums at will in California.”

In opposition, Micah Weinberg of the Bay Area Council, say rising rates reflect rising health care costs and extended life spans, and the government should let competition keep rates down. Weinberg calls himself an “enthusiastic supporter of healthcare reform,” and argued on KPCC’s Patt Morrison Tuesday that the system is already making reforms — reforms he feels the public option doesn’t address.  “We’re expanding insurance coverage by giving people insurance subsidies to purchase insurance through the exchanges, so that’s exactly what we’re doing.  A public option doesn’t get us any closer to that goal and it’s not a helpful addition to what we’re trying to accomplish,” says Weinberg.

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