Premiums Shrink Under Reform Plan

An insurance framework proposed by the Commonwealth Fund includes a national insurance exchange that would offer both private insurance plans and a new public plan option “that would achieve near-universal coverage.”

The report estimates that premiums for the public plan option would be at least 20 percent below those currently available for a comparable package of benefits in the private market.

The public plan option would prompt private plans to innovate and reexamine the way they operate.

As described in “The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way,” the system would change the way care is paid for by increasing the value of primary care. It would move from a fee-for-service design to more bundled methods of paying that encourage coordinated care. It would also hold providers accountable for improving health outcomes.

Individual and small businesses would benefit because the new option would provide a less expensive alternative for the uninsured and underinsured than what is now available. Savings would derive from lower administrative costs and use of Medicare’s reformed provider payment rates.

Cathy Schoen, senior vice president at the Commonwealth Fund, says private insurers would want to participate in the exchange because they “would have access to the entire under-65 market. If you didn’t participate in the exchange, employers and individuals would have a hard time finding you. If an insurer did not participate, it would lose access to business. The public plan is a major new competitor, and a private insurer would want to be seen side by side with it.”

The report estimates that implementing this type of insurance exchange could result in a cumulative reduction in national health expenditures through 2020 of $3 trillion.

But Schoen cautions that “the insurance reforms alone won’t be enough. If you don’t have the payment and the information system reforms, we won’t see that $3 trillion savings.”