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There has been a lot of recent discussion about insurance companies’ sudden entrance into the health care debate. The Washington Post referred to the health insurers as Obama’s “top foe” last week, mainly as a response to actions taken by America’s Health Insurance Plans (AHIP), industry trade group, including an advertising campaign opposing health care reform and a controversial PricewaterhouseCoopers report commissioned by AHIP analyzing the recent Senate Finance Committee proposal.

Many others have criticized AHIP’s actions, claiming that AHIP is scared and attempting to block health insurance reform as a last ditch resort. Well, of course. The health insurance industry is reacting because the public option will put them out of business. Although they are not saints, the health insurers simply pay claims and charge premiums. In the end they make a 3% profit out of doing so. They also subsidize Medicaid and, to a lesser extent, Medicare-by paying doctors, hospitals, and more. The payment difference is not by choice-rather, free (and oligopolistic) market forces at work.

The idea that a public option will make health care more affordable can only happen in 2 ways: (1) pay doctors, hospitals, and others less. This may be a good idea, but there are consequences of monopolistic, heavy handed pricing tactics; (2) we can have taxpayers subsidize the public option.

The idea that the public option will save on administrative costs is not realistic. What does Medicare do for administrative costs? It contracts with Blue Cross and other insurance companies! If you still don’t believe it, go visit any major health insurer headquarters in CT (Anthem, Aetna, Cigna…). The places are half empty, having massively reduced costs over the last 5 years. “Profiteering” may be considered bad, but these insurers are very lean.

We don’t like HMOs, because they are too restrictive. We don’t like limited benefits so we pile on mandated benefits each year. We don’t like high deductibles, but we do like high tech cures. There is no ceiling and our solution? A public option? If our appetites are insatiable, NO option can solve the problem.

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