PPACA: United Health Care vs the Public Option

A story that is getting some traction, though mostly lost against the New York primary, is that for profit health insurance company United Health Care is looking to drop its Exchange Plans under PPACA. For example this from Fox: UnitedHealth pulls back on ObamaCare exchanges amid huge losses This is of course presented as some additional proof of the failure of ObamaCare. And given the current structure that has the Exchange 100% reliant on private insurance providers and so vulnerable to insurance provider drop-outs this may be. But from the perspective of supporters of the original version of PPACA, the one that came out of Senate HELP and the House Tri-Committee this was more a feature than a bug.

In 2009 it was abundantly clear that Single Payer/Medicare for All was not a viable option. It wasn’t going to happen. (Please argue the point in comments.) But there was a narrow window open for a backdoor path to Single Payer. And that was the Public Option in both its Strong and Weak forms. The idea was a properly designed Public Option would out-compete any private insurance provider on price. That is with or without some form of the mandated limits on the Medical Loss Ratios that in turn restricted Big Insurance profits, private insurers would find some markets unprofitable and so abandon them. In particular this was projected to happen in rural markets and second and third tier metro areas. Which markets would then be available for scoop up by the (so-called) non-crofts and the Public Option. My own vision was that over time a version of Single Payer would evolve from the outside in as Big Insurance retreated to serving high margin/richer urban markets.

Now of course we don’t have the Public Option. But even so I am not going to shed a tear that for profit insurers like United Health just are not having the success in extracting huge rents from PPACA. Because those rents/profits were not adding value anyway. And while there is theoretically some downside in reduced competition the structure of PPACA doesn’t really allow surviving health care insurers to extract monopoly rents. And to the extent that certain markets begin to be underserved there will be that much pressure to allow entrance to some version of the original Public Option, perhaps by leveraging the presence of existing Public Health, Veterans Administration and even Indian Health Service hospitals and clinics. And Community Health Centers. And Free Clinics. Any of which would benefit by a new pool of actual paying customers with insurance funded by Exchange subsidies.

Now clearly there are some dangers to trying to transition to Single Payer via crowding out for profit insurers. Especially since there is not an existing Public Option in the way the original plans envisioned. Still there is no reason to cry that Wall Street is not extracting what it considers to be its due pound of flesh by providing health care to rural and poor areas. United Health Care had a business plan. Its success required large rent extraction. That the PPACA as designed didn’t end up making it as easy to extract excess rents as the FirePups assumed is a good thing.

The road to Single Payer is certainly rocky. And maybe we will never get there in total. But if we do seeing the corpses of United Health Care and Aetna as squished road kill should not be triggers for pity and sorrow. Unless you are a Free Market fetishist.

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