Insurers' Role Key to Health System Overhaul, CBO Says

By Lori Montgomery
Washington Post Staff Writer
Thursday, May 28, 2009

President Obama's plan to overhaul the nation's health-care system could dodge one of the bullets that felled Clinton-era reforms by maintaining an active and independent role for private insurance companies, congressional budget analysts said yesterday.

In a report, the Congressional Budget Office said a government mandate requiring people to buy health insurance would not necessarily be considered a new form of federal taxation so long as people had a variety of private plans from which to choose and a government entity was not in charge of collecting their insurance premiums.

"In CBO's view, the key consideration is whether a proposal would be making health insurance an essentially governmental program, tightly controlled by the federal government with little choice available to those who offer and buy health insurance -- or whether the system would provide significant flexibility in terms of the types, prices and number of private-sector sellers of insurance available to people," the CBO's director, Douglas Elmendorf, wrote in his blog. "The former -- a governmental program -- belongs in the federal budget (including all premiums paid by individuals and firms to private insurers), but the latter -- a largely private-sector system -- does not."

The CBO took a different view of Clinton-era reforms in 1994, concluding that a proposed mandate on employers and employees to buy into a government-run health system would constitute a form of taxation and thus a massive expansion of the federal government. The decision was one of several by the CBO that fueled Republican attacks and helped to torpedo reform efforts.

Mindful of that history, reformers this time are treading carefully around the role of government. Sen. Max Baucus (D-Mont.) has said legislation to be unveiled next month will include a "public option" for the uninsured, a government-run plan to be included among private offerings. Lawmakers are also considering the creation of "exchanges" through which individuals and small companies could buy insurance.

The CBO report suggests that those measures would not necessarily bring all insurance premiums onto the federal budget.

"Premium income -- for a public plan (or plans) and for insurance purchased through exchanges or in the private market -- should be classified as federal revenues if there is an individual mandate and tight government control of the insurance market," Elmendorf wrote. Income from premiums should not appear in the federal budget, however, "if there is no mandate and no public plan, or there is an individual mandate and an active, loosely restricted private market, and if premiums are paid through nongovernmental exchanges or directly to insurers."

© 2009 The Washington Post Company