Thursday, November 5, 2009

A history lesson about the "public option"

Those who oppose a government-run health insurance option argue that it would kill the private health insurance industry and result in a government takeover of one-sixth of the American economy. Advocates of the so-called "public option" say this is nonsense, but if Florida's property insurance "public option" is any indication, there may indeed be much to fear:
After Hurricane Andrew hit Florida in 1992 some Floridians were having difficulty purchasing homeowners’ insurance. (The reason: rates are regulated, and at the regulated rates some properties are too great a risk.) So, the state government formed Citizens Property Insurance Corporation, which is owned and operated by the State of Florida. . . .

[The] idea, like President Obama’s idea with health insurance, is that with a public option, private insurers would have to keep their rates in line or risk losing customers to the government insurer.

That’s what’s happened in Florida. Today about 30% of homeowners’ policies are written by Citizens, which is the largest property insurer in the state. It’s about to get bigger too. The largest private insurer, State Farm, had a rate request rejected last year, and now is pulling out of the state altogether (for property insurance; they’ll still insure your car). As the largest private insurer pulls out over a three-year period (that period negotiated with the state), Citizens will get an even larger share of Florida’s property insurance.

Everybody in Florida knows Citizens is a fiscal time bomb. Already, every Florida insurance policy (on homes, boats, cars, etc.) pays a surcharge that goes to Citizens, but Citizens still doesn’t have sufficient reserves to weather a major hurricane. When one comes, Florida taxpayers will be on the hook for the bill.

The legislature knows this, and actually passed a bill last year that would have done a great deal to solve the problem by partially deregulating rates private insurers could charge. State Farm would have stayed in Florida had that bill taken effect, but it was vetoed by the Governor. The public option is displacing private insurance.

In Florida, the public option has meant a substantial socialization of insurance, subsidization of the public option by those who take a private option, and the creation of a fiscally-unsound public insurance company despite the subsidy. Now, we have an opportunity to do the same thing at the national level with health insurance. The results have not been good in Florida, and everyone in Florida knows it. Why would it be any different at the national level?

Yep, exactly.

It's a scam, and anyone who supports it is either complicit in that scam or being co-opted as a useful idiot.

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