Wednesday, December 9, 2009

With the Public Option gutted, fix ERISA to keep insurers honest

[Updated December 10, 2009]

It appears the public option aspect of health insurance reform has been eliminated or, at the least, has morphed into a feeble remnant of its original incarnation.

Remember the rationale for having a public option was to keep insurers honest. President Obama said explicitly that he didn’t support the public option in order to eliminate the insurance industry – he just wants to hold them accountable.

We could go a long way in the direction of accomplishing exactly that – with utterly no impact on the public coffers – by fixing the ERISA problem.

The current proposal in the senate, so far as we know at any rate, would allow state law claims and remedies with respect to coverage purchased through the contemplated Health Insurance Exchange. Individual private policies already involve state law and not ERISA. That leaves employment-based insurance, which is by far the most common type, and which is governed by ERISA -- imposing on the insurer no meaningful accountability at all.

So the natural alternative to the now-apparently-moribund public option is to address the malignant effects ERISA has on the behavior of insurance companies.

President Obama, Congress, now is the time to expose the health insurance industry to some real accountability, to require them to make whole the innocent insureds whom they defraud and kill. Do something about ERISA, and we’ll achieve some actual reform.

Update: The public option indeed appears to be dead. House Speaker Nancy Pelosi says the House would still likely vote for an alternative proposal which accomplishes certain broad goals, and specifically relating to the late lamented public option says "We believe, we in the House believe, that the public option is the best way to hold insurance companies honest -- to keep them honest and also to increase competition. If there is a better way, put it on the table."

There is a better way: fix ERISA.

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