Health care issues: Insurance market overhaul

A look at key issues in the health care debate:

THE ISSUE: Are changes in the insurance industry enough to fix problems in the nation’s health care system?

THE POLITICS: To help expand health coverage, President Barack Obama is seeking changes to underwriting practices that can prevent Americans from obtaining affordable insurance. His proposals would ban higher premiums, caps or denial of coverage because of a pre-existing medical condition or when a person gets sick. But he contends that’s not enough; Obama also would set up a government-run insurance option which he contends will keep private insurers honest. Republicans say allowing the government to sell insurance in competition with private industry is unnecessary and will lead to less coverage because employers will drop private insurance for their employees. Insurance companies also reject competition from the government, but might go along with the other restrictions because they get something out of it — a larger customer base that will pay premiums and spread the risk over more people.

WHAT IT MEANS: Underwriting changes could achieve goals of universal coverage, but they won’t reduce rising health care costs by much if private insurers are expected to give up profits. While a public option could utilize the government’s buying power to negotiate rates, it also has the potential to put private insurers out of business if hospitals and doctors charge them more. Other proposals include health insurance cooperatives or a “trigger” that would put a public option into effect if private insurers don’t achieve cost savings. Focusing solely on insurance reform also ignores the role of doctors and hospitals in containing costs. Because of their “fee for service” structure, health care providers have financial incentives to provide large quantities of medical care even if some of it is wasteful. So far, Democrats and the Obama administration have shown little interest in addressing this important aspect.

— Hope Yen