Report: Public insurance option could pose serious threat to private insurance

A report from consulting firm the Lewin Group raises questions about whether a public health insurance option would put private insurance companies out of business (Source: “Study raises questions about public health plan,” Associated Press, April 7, 2009).

Although the Lewin study, titled “The Cost and Coverage Impacts of a Public Plan: Alternative Design Options,” points out that there are many uncertainties about what a public option might look like, it concluded that if it resembled Medicare in terms of payment rates for doctors and hospitals (and therefore offer much lower premiums than private insurers could afford), its membership would quickly balloon to 131 million, while enrollment in private plans would plummet.

"The private insurance industry might just fizzle out altogether," said John Sheils, a Lewin vice president and leading author of the study.