Do the Democratic candidates for president see a role for private insurance?

The Democratic candidates for president are making healthcare, including rising medical costs, surprise hospital bills and high prescription drug costs, a major defining issue in their campaigns. Their positions also reflect the differences among them.

Some concern already is being raised that the Democratic candidates are focusing too much on plan details, and on how they differ from each other on these details, rather than on the broader, more basic goals of their reforms. None of them has explained the thorny practical concern of just how they would move the U.S. healthcare system from where it is now to where they want it to be.

Candidates’ positions on private insurance

Among the progressive candidates who are advocating “Medicare for All” (or some other kind of single-payer plan), none have expressed concern that it will mean more than 150 million people currently covered by employer-sponsored insurance will have their current insurance disrupted and replaced by something unknown and that isn’t of their own choosing.

Meanwhile, very few of the moderate candidates have a clear role for private insurance. These include former vice president Joe Biden and former governor John Hickenlooper, who recently announced he is dropping out of the race and is considering a run for the Senate in Colorado.

The positions of some candidates remain unclear. For example, during the debate, Sen. Kamala Harris (D-Calif.) didn’t identify herself as supporting the continued availability of private insurance. But after the debate, she claimed she misheard the question and does not support abolishing private insurance. Later, she said that she would allow supplemental private insurance to be available even though everyone would be covered by Medicare. She also calls for a ten-year transition to her single-payer system, which would presumably eliminate private insurance.

The position of the Democratic candidates, other than Biden and perhaps Harris, ignores the substantial “pushback” that occurred in 2013, when many people with individual insurance were informed that their insurance plans would no longer be available to them. In some cases, the reason was that their plans didn’t conform to the new requirements under the Affordable Care Act (ACA), and in others, it was that insurance companies deemed the remaining potential market insufficient to warrant their continued participation.

It was particularly embarrassing for President Obama, who was on the record as saying, “If you like your plan, you can keep your plan, and if you like your physician, you can keep your physician” — neither of which turned out to be true. Many plans did not conform with the ACA requirements and, therefore, could not be offered after an initial grace period, and many physicians chose not to participate in the plans included in their state’s insurance exchange.

The Biden plan

The Biden plan, which was released in July, builds on the ACA. It provides a government-run public option, which is a concept that the Democrats regarded as too radical to include in 2010. Biden claims this approach would allow employer-based insurance to continue, thereby making private insurance available to those who want it. His plan is estimated to cost $750 billion over 10 years and would be paid for by rescinding President Trump’s 2017 tax cut, returning the maximum tax bracket to 39% and eliminating the capital gains tax lower tax rate for families with incomes greater than $1 million.

There is an important difference between what Biden is proposing now and the public option considered in 2010. The 2010 public option would have been relevant for only the relatively small percentage of the people buying insurance in the exchanges, currently estimated to be about 8 million, and 90% of the insured population would not have been affected.

The current Biden public option plan differs fundamentally from the 2010 plan in that everyone would have a choice to purchase a public insurance option like Medicare, and the subsidies would be more generous than under the ACA. The Biden plan proposes to reduce costs by “negotiating” lower prices from hospitals and other healthcare providers just as Medicare does.

The term negotiating is in quotes here because Medicare does not negotiate prices. Rather, it sets them administratively, and hospitals and physicians can either accept the lower prices set by the government or not participate in the program. Most politicians prefer to say “government should negotiate lower prices” because it sounds better than “government should set the prices administratively,” even though the U.S. Department of Health & Human Services (HHS) actually has never negotiated prices and has no experience doing so.

Other proposed plans

There is no room for private insurance in the Medicare for All plan introduced by Sen. Bernie Sanders (I-Vt.) in April. His plan provides comprehensive healthcare to everyone without any out-of-pocket expense, and it includes physician and hospital care; long-term care; dental, hearing and vision care; and prescription drugs. Although estimated to cost as much as $32 trillion over 10 years, it does not have a specific financing proposal attached to it. Because Sanders has previously backed significantly higher taxes on wealthier individuals and businesses, this approach is presumably how he would pay for the expanded plan.

Elizabeth Warren (D-Mass.) also made her position clear during the June debates: She suggests private insurance should be banned and all Americans should get their health insurance from the government.

The compatibility of a public option with availability of private insurance

Whether a public option that is open to anyone with employer-sponsored or individual coverage is compatible with the continued availability of private insurance is debatable. Some observers of the insurance industry argue that the use of government power to set lower prices would make it impossible for private insurance to compete with a government plan; it eventually would drive private plans out of business. This argument seems inconsistent with the proven success of Medicare Advantage (MA) in competing with the traditional Medicare program, given that MA enables private plans to make Medicare offerings available, frequently with supplemental benefits provided at an additional cost.

Of course, presidents only propose policies. It’s the Congress that passes the legislation that turns these policies into legislation. It’s hard for me to imagine any Congress going so far as to directly outlaw private insurance. But passing legislation that may ultimately undermine private insurance is another matter.