Health-Care Reform July 29, 2009, 1:30PM EST

Health Care: Public Plan, 'Pay or Play' Provision May Go

Some of Obama's and the Democrats' most cherished policies may be ditched as the Senate Finance Committee seeks a compromise solution

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President Barack Obama continued his barnstorming campaign for health-care reform on July 29, pledging at a public forum in North Carolina that any reform would contain consumer protections to ensure that voters will be able to keep the health care they have. But back in Washington, the powerful Senate Finance Committee, in an effort to come up with a health-care reform bill that could win Republican support, may ditch some of the provisions that Obama most wants—but that business most opposes.

Sources inside the process say the final bill probably won't contain a publicly financed insurance plan or a requirement that employers offer all their workers health benefits.

Of course, reform activity in Washington is moving at such a fast and furious pace that the details of any proposals can change hour to hour—and a deal could fall apart at the last minute. The Senate Finance Committee has said it wants to vote on a final bill before Congress goes on its summer recess Aug. 7, and though that deadline is looking harder and harder to achieve, no one is yet willing to say it's undoable. The Senate Committee on Health, Education, Labor & Pensions has already voted out a bill, and two of the three committees participating in the House Trilateral Committee have voted on their own bill. The provisions of all these different legislative proposals will have to be merged in a House-Senate conference committee, so it is uncertain at this point who or what will prevail.

Undercut Private Insurers?

The publicly financed insurance plan is included in the House bill, but it has been a particular flash point in both chambers. Health insurers and many hospitals and doctors avidly oppose a public plan that would be financed by the government. They complain that, with no need to make profits, a public insurance plan would undercut private insurers on price and use its power to pay doctors and hospitals less, creating unfair competition.

But President Obama has long argued that only a public plan would inject much needed competition into the health insurance market, now dominated by one or two competitors in most states. As recently as July 23, Obama said: "The notion that all these insurance companies who say they're giving consumers the best possible deal, if they can't compete against a public plan as one option, with consumers making the decision what's the best deal, that defies logic, which is why I think you've seen in the polling data overwhelming support for a public plan."

Despite such public support, the Senate Finance Committee, led by Senator Max Baucus (D-Mont.), is instead considering a consumer-owned insurance co-op health plan. These co-ops would be owned and operated by their members, presumably the individuals and small business who have difficulty finding affordable insurance now. There are similar markets now in rural areas for electric power, phone service, and commodities such as milk and wheat, which makes the concept a familiar one to the many Republican senators from rural states. In fact, the co-op idea was designed and championed by Senator Kent Conrad (D-N.D.), a key member of the Finance Committee.

Conrad has proposed that insurance co-ops would be set up on either a statewide or regional level, be nonprofit, offer a number of coverage options, and operate under the same regulations that apply to private insurers. Though co-ops would likely offer lower-cost coverage for their members than they could buy on the open market, critics complain that they would be just another insurer, without the market power to negotiate lower prices with hospitals or lower premiums from competitors.

Taxing Health Benefits

The Finance Committee is also looking to move away from the "pay or play" option that would require all but the smallest employers to either offer insurance benefits or pay a penalty. Instead, the committee is considering a "free rider penalty" on employers whose workers either end up on Medicaid or get some other form of subsidized care.