Jim Cooper said there were many ways to define a public option, and a few different versions of it have appeared in various drafts in the current reform proposals. That seems to have led to some confusion, even here where people are by-and-large well informed.
The bill text is available on Thomas, the version to look at is the one "Engrossed as Agreed to or Passed by House".
So what is the exact form of the public option in HR.3962, as passed by the House? The short answer seems to be: it's better than you probably thought.
There are four key attributes of the public option that I can think of: availability, revenue generation, payment rates and provider network. Let's address these in turn:
Availability
This is where some of the most serious disinformation comes in. I've responded to claims in comments here that you can only enter the PO if you're currently uninsured - that's false. Earlier drafts of the bill would prohibit you from accessing the public option if your employer offered group coverage - that's out. So what's in?
Title III of HR.3962 covers both the Exchange and the Public Option. Combining them makes sense, because the Public Option is available only through the Exchange, but is available to all in the Exchange. Section 302 provides the definitions.
For me, the most important part:
(a) Access to Coverage- In accordance with this section, all individuals are eligible to obtain coverage through enrollment in an Exchange-participating health benefits plan offered through the Health Insurance Exchange unless such individuals are enrolled in another qualified health benefits plan or certain other acceptable coverage.
All individuals are eligible unless enrolled in other acceptable coverage. If your employer's plan is not acceptable, you're eligible. Even if your employer's plan is acceptable, you're eligible if you decline to join the employer plan. So, everyone has the option to join the public option if they want to.
Now, when it comes to employers, there's a phase-in schedule of which employers can opt in to the Exchange:
(c) Transition- Individuals and employers shall only be eligible to enroll or participate in the Health Insurance Exchange in accordance with the following transition schedule:
(1) FIRST YEAR- In Y1 (as defined in section 100(c))--
(A) individuals described in subsection (d)(1), including individuals described in subsection (d)(3); and
(B) smallest employers described in subsection (e)(1).
(2) SECOND YEAR- In Y2--
(A) individuals and employers described in paragraph (1); and
(B) smaller employers described in subsection (e)(2).
(3) THIRD AND SUBSEQUENT YEARS- In Y3--
(A) individuals and employers described in paragraph (2);
(B) small employers described in subsection (e)(3); and
(C) larger employers as permitted by the Commissioner under subsection (e)(4).
Y1 is 2013, Y2 and Y3 obviously therefore are 2014 and 2015. Note that starting 2015, the Commissioner has discretion to open up the Exchange to companies of larger and larger sizes until everyone can join. This phase in is intended to allow the Exchange to work out its kinks without getting swamped by the volume of business. The definitions of "smallest", "smaller" etc. are provided:
(e) Employers-
(1) SMALLEST EMPLOYER- Subject to paragraph (5), smallest employers described in this paragraph are employers with 25 or fewer employees.
(2) SMALLER EMPLOYERS- Subject to paragraph (5), smaller employers described in this paragraph are employers that are not smallest employers described in paragraph (1) and have 50 or fewer employees.
(3) SMALL EMPLOYERS- Subject to paragraph (5), small employers described in this paragraph are employers that are not described in paragraph (1) or (2) and have 100 or fewer employees.
(4) LARGER EMPLOYERS-
(A) IN GENERAL- Beginning with Y3, the Commissioner may permit employers not described in paragraph (1), (2), or (3) to be Exchange-eligible employers.
(B) PHASE-IN- In applying subparagraph (A), the Commissioner may phase-in the application of such subparagraph based on the number of full-time employees of an employer and such other considerations as the Commissioner deems appropriate.
(5) CONTINUING ELIGIBILITY- Once an employer is permitted to be an Exchange-eligible employer under this subsection and enrolls employees through the Health Insurance Exchange, the employer shall continue to be treated as an Exchange-eligible employer for each subsequent plan year regardless of the number of employees involved unless and until the employer meets the requirement of section 411(a) through paragraph (1) of such section by offering a group health plan and not through offering an Exchange-participating health benefits plan.
I like the continuing eligibility part: if a small company joins the Exchange and grows into a large company that would otherwise be barred, it can still use the Exchange unless and until it finds another acceptable plan it prefers.
Also important is what it means to employees if their employer chooses to use the Exchange to offer benefits:
(6) EMPLOYER PARTICIPATION AND CONTRIBUTIONS-
(A) SATISFACTION OF EMPLOYER RESPONSIBILITY- For any year in which an employer is an Exchange-eligible employer, such employer may meet the requirements of section 412 with respect to employees of such employer by offering such employees the option of enrolling with Exchange-participating health benefits plans through the Health Insurance Exchange consistent with the provisions of subtitle B of title IV.
(B) EMPLOYEE CHOICE- Any employee offered Exchange-participating health benefits plans by the employer of such employee under subparagraph (A) may choose coverage under any such plan. That choice includes, with respect to family coverage, coverage of the dependents of such employee.
If your employer uses the Exchange, you can pick any plan from the Exchange. Nice. Choice is good.
Also, this is in effect repeating one of the better aspects of the Massachusetts Connector: it merges the individual and small group markets, which provided an immediate and significant reduction in premiums on the individual market.
Now, what happens if your employer offers a group plan that is deemed acceptable, but you decide you'd rather shop for yourself in the Exchange? No problem! In Section 411, which is the start of the part of the bill dealing with employer coverage, we find:
(3) CONTRIBUTION IN LIEU OF COVERAGE- Beginning with Y2, if an employee declines such offer but otherwise obtains coverage in an Exchange-participating health benefits plan (other than by reason of being covered by family coverage as a spouse or dependent of the primary insured), the employer shall make a timely contribution to the Health Insurance Exchange with respect to each such employee in accordance with section 413.
From 2014 onwards, if your employer offers "acceptable" coverage, but you don't like it and shop on the Exchange instead (for example to access the public option), you don't even forfeit your employer contribution. The employer pays it into the Exchange. Sweet.
The only downside to that is that it does actually undermine the claim that you can keep your current plan if you like it (and are silly enough to like a plan that isn't that good): if your current group plan is not as good as some of the offerings on the Exchange, other employees in your company are likely to opt for the Exchange, which could make your group plan non-viable. But this will only happen if there is a better offer in the Exchange, so it's really no big deal.
In my opinion, then, the reality of the public option as passed by the House is dramatically different from the "10%" option we've been hearing about. Everyone can choose it, and starting 2014, no-one will even lose an employer contribution by making that choice.
Revenue Generation
Well, this part of the Schumer compromise seems to have been accepted by most of Congress. The public option will "pay for itself" with premiums, as specified in Section 322:
(a) Establishment of Premiums-
(1) IN GENERAL- The Secretary shall establish geographically adjusted premium rates for the public health insurance option--
(A) in a manner that complies with the premium rules established by the Commissioner under section 213 for Exchange-participating health benefits plans; and
(B) at a level sufficient to fully finance the costs of--
(i) health benefits provided by the public health insurance option; and
(ii) administrative costs related to operating the public health insurance option.
(2) CONTINGENCY MARGIN- In establishing premium rates under paragraph (1), the Secretary shall include an appropriate amount for a contingency margin (which shall be not less than 90 days of estimated claims). Before setting such appropriate amount for years starting with Y3, the Secretary shall solicit a recommendation on such amount from the American Academy of Actuaries.
What's worse, the bill says it must be allowed to fail if the accounts don't add up:
(3) NO BAILOUTS- In no case shall the public health insurance option receive any Federal funds for purposes of insolvency in any manner similar to the manner in which entities receive Federal funding under the Troubled Assets Relief Program of the Secretary of the Treasury.
Obviously, that could be changed by further legislative act, but the odds of getting a bailout bill passed are probably slim - it would definitely be unanimously opposed by Republicans (although of course that's a safe assumption at every step of the process, and we're still making progress).
Ultimately, it has to be paid for one way or another. The upside to using premiums is that it's one of the most transparent ways that can be done. The downside is that it's somewhat regressive, despite the subsidies available to those on low incomes. The political reality is that this country doesn't yet seem to have fully embraced what it means for health care to be a right not a privilege: that there should be no connection between access and ability to pay. The best way to pay for things which are rights is progressive taxation. Maybe one day we'll get there, but I won't be holding my breath.
Also, the prohibition on the taxpayer providing even emergency financing in the case of unforeseeable drains on the public option fund is something of a concern. It means either the premiums will have to be set higher than necessary to build up a substantial reserve, or the public option will be somewhat fragile. It also suggests a way for a possible future nefarious Republican administration to kill the thing: appoint a Commissioner who will deliberately set premiums too low, and let the thing go bankrupt.
Payment Rates
This is one of the best understood aspects of the public option in HR.3962. We were all on tenterhooks waiting to see whether Pelosi decided to set rates at Medicare+5 or have them negotiated. In the end she felt Medicare+5 could not pass and settled for negotiated rates (another aspect of the Schumer compromise). Damn. This will likely increase the costs of the plan, thus increasing the premiums, thus increasing the amount of subsidy that will have to be paid for lower-income individuals enrolled in the public option, also reducing price pressure on private sector competitors, thus increasing the subsidies paid to individuals enrolled in private sector Exchange plans. And meantime the bill to fix the distortions in Medicare reimbursement rates that were used as an excuse to kill the Medicare+5 PO was voted down by the very same people who were complaining about the rates - hypocritical bastards.
Section 323 tells the story:
(a) Negotiation of Payment Rates-
(1) IN GENERAL- The Secretary shall negotiate payment for the public health insurance option for health care providers and items and services, including prescription drugs, consistent with this section and section 324.
(2) MANNER OF NEGOTIATION- The Secretary shall negotiate such rates in a manner that results in payment rates that are not lower, in the aggregate, than rates under title XVIII of the Social Security Act, and not higher, in the aggregate, than the average rates paid by other QHBP offering entities for services and health care providers.
(3) INNOVATIVE PAYMENT METHODS- Nothing in this subsection shall be construed as preventing the use of innovative payment methods such as those described in section 324 in connection with the negotiation of payment rates under this subsection.
(4) TREATMENT OF CERTAIN STATE WAIVERS- In the case of any State operating a cost-containment waiver for health care providers in accordance with section 1814(b)(3) of the Social Security Act, the Secretary shall provide for payment to such providers under the public health insurance option consistent with the provisions and requirements of that waiver.
At least this does leave the door open for outcomes-based payments instead of pay-per-procedure. This could help bend the cost curve substantially. Note that there are explicit bounds set here: title XVIII is Medicare, so the rate schedule in the aggregate must pay at least as much as Medicare, and no more than the average private sector insurer. This does allow for the possibility that individual procedures (or outcomes) could be paid outside those bounds, but the schedule as a whole must be within them.
Provider Network
I stumbled across this on Friday when looking up something else (I was debating the effect of the Stupak amendment, which I find to be very bad). I'm actually pleasantly surprised.
You see, when the decision was made to go with negotiated rates, it was a natural assumption that this also meant a negotiated provider network. This assumption is wrong. Still in Section 323:
(b) Establishment of a Provider Network-
(1) IN GENERAL- Health care providers (including physicians and hospitals) participating in Medicare are participating providers in the public health insurance option unless they opt out in a process established by the Secretary consistent with this subsection.
(2) REQUIREMENTS FOR OPT-OUT PROCESS- Under the process established under paragraph (1)--
(A) providers described in such paragraph shall be provided at least a 1-year period prior to the first day of Y1 to opt out of participating in the public health insurance option;
(B) no provider shall be subject to a penalty for not participating in the public health insurance option;
(C) the Secretary shall include information on how providers participating in Medicare who chose to opt out of participating in the public health insurance option may opt back in; and
(D) there shall be an annual enrollment period in which providers may decide whether to participate in the public health insurance option.
(3) RULEMAKING- Not later than 18 months before the first day of Y1, the Secretary shall promulgate rules (pursuant to notice and comment) for the process described in paragraph (1).
It's not a start-from-scratch provider network! It leverages the Medicare network, with provider opt-out. This language is a little bit vague on the ability of non-Medicare providers to participate in the public option, but I would take 323(b)(2)(D) to imply that they may opt in if they so choose. Good.
Summary
It remains a disappointment that we lost Medicare+5 rates in the House. But the rest of the public option provisions appear to have been unfairly maligned. What we got is actually a pretty robust deal: yes, rates are negotiated, yes, it may not be funded from general revenues, but it's open to all (well, except those not legally present, and those already on Medicare, Medicaid or VA health), and it does leverage the Medicare provider network to get a good leg-up.
It's definitely worth fighting to keep it in the Senate and Conference.