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Olympia Snowe's Trigger Amendment

Page 207 of the thrilling "Amendments Relating to Expanding Health Care Coverage" (PDF) is going to get a lot of attention. Sandwiched between a Hatch amendment to restrict abortion and a Snowe amendment to expand subsidies to working people being offer employer-based insurance is -- wait for it -- Olympia Snowe's trigger:

This amendment establishes a non-profit government corporation through which a "safety net" plan would be provided in any state in which affordable coverage was not available in the Exchange to at least 95% of state residents. An individual would be deemed to have affordable access if either of two conditions is met. First, two or more plans are offered with premiums – the cost of which does not exceed a specified percentage of the individual‘s adjusted gross income (AGI), after deducting any available tax credit or employer subsidy from the cost of such premium. The percentage contribution shall range from 3 percent of AGI at 133 percent of the Federal Poverty Level, to 13 percent at 300 percent and above.

Assessment of affordability shall follow submission of plan premiums filed one year in advance of the first day of each policy year, and should a state be found to not meet the 95% threshold, plans would be permitted to submit of any revised premium filings, after which a second assessment of affordability shall be performed. If, after that second assessment, a state still be deemed as not meeting the affordability standard, the safety net plan shall be offered within that state, and shall be available at the pending open season enrollment.

What this says, basically, is that the public option triggers into existence in a particular state if there aren't two or more health insurance plans that cost less than 13 percent of a family's income (or a bit less below 300 percent of the poverty line).

Color me unimpressed. I could imagine a stringent trigger that becomes more aggressive with each passing year: Start at 13 percent of income, say, but by 2019, it needs to be 11 percent of income, as the idea is that insurers need to be competing to bring down costs. But this isn't that trigger. It's also hard to see a public plan in a couple of states wielding much power. It would be better if, say, five states failing to meet the affordability threshold triggered a national public option. But, again, this isn't that trigger.

The "bright" side -- if you want to call it that -- is that health-care costs are going to continue to rise faster than incomes. Within a decade or so, it'll be likely that very few states will have comprehensive policies costing less than 13 percent of income. In that scenario, the trigger does produce a bunch of public plans, at least over the long run.

But in that scenario, the plan is in all sorts of trouble, as the individual mandate is too stringent, and the subsidies are ineffective, so it's a bit hard to say what changes get made. My sense is that Olympia Snowe does not, in fact, want 50 public plans, but that does look like the long-term outcome of the trigger. The question, I guess, is how ingenious insurers will be at creating crappy plans that don't cover much but provide two "affordable choices" to delay the trigger. That doesn't seem like a good incentive for the system, but it's definitely there.

By Ezra Klein  |  September 21, 2009; 10:55 AM ET
Categories:  Health Reform  
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I also wonder how long such a state public plan would last. Does it disappear if two or more affordable plans come into existence?

13% is pretty high as well. Maybe not for the future, but it will allow much growth in insurance costs before it comes into existence.

And the two-crap-plans loophole is pretty big.

I was hoping for something much better. But I guess it is a chance for debate.

Posted by: michiganmaine | September 21, 2009 11:04 AM | Report abuse

Oh, and thanks for putting this up. I think this is where the heart of debate will be over the next week or two.

Posted by: michiganmaine | September 21, 2009 11:05 AM | Report abuse

"Start at 13 percent of income, say, but by 2019, it needs to be 11 percent of income, as the idea is that insurers need to be competing to bring down costs."

This is the wrong objection. Given that close to no country has slowed health care cost growth to the same level of GDP growth AND the fact that incomes below 300% grow slower than GDP growth-- forcing plans to provide affordable coverage at a fixed percentage of that income would be a staggering accomplishment-- something that no country could claim today. You sort of get at that with your "bright side" comment, but that's sort of the point-- there's really no expectation for health care cost growth to fall below income growth, nor is it clear that this is a sound policy objective. See Cutler, David, on the question of appropriate health care spend.

Posted by: wisewon | September 21, 2009 11:27 AM | Report abuse

I am still fascinated by there being so much of a fight over public plans that aren't going to make much of a difference. These are public plans on the state level that are non-subsidized. I just don't at all see where people think that massvive savings are going to come from.

Posted by: spotatl | September 21, 2009 11:29 AM | Report abuse

Snowe will never support a triggerable trigger. She fundamentally does not believe in public health insurance. Why she is being allowed to define the Public Option for the people who actually want one is beyond me.

Posted by: bmull | September 21, 2009 11:41 AM | Report abuse

A plan with a triggered public option can apparently make it out of the Finance Committee. Then it is combined with the public option in the HELP Bill into either much stronger and maybe regional triggers or a straight public option. By then MA has a replacement for Kennedy, and the question is whether Snowe sells out her constituents but all the Dems hold topgether or whether she holds her nose and Lincoln or Bayh or Conrad betrays the Dems.

And it also looks like the subsidies will be going up.

Any hope for Judy Feder-type fail-safe cost control measures?

Posted by: Mimikatz | September 21, 2009 11:48 AM | Report abuse

"as the idea is that insurers need to be competing to bring down costs."

Please, please tell me where this idea that competition among private, for-profit insurers -- with or without a pubic option -- would bring about cost reductions? I read similar statements all the time but I haven't seen a explanation of why people believe it.

Would you please point to an example where this has happened? What is so different about the US that we can expect an outcome different from what the Swiss (where all health insurance is non-profit) have experienced? At least the folks in Massachusetts admit that cost containment was never part of the plan.

You are problably correct in saying that there will be a lot of attention given to this over the next few weeks but that doesn't mean that whatever is agreed in this area will make one bit of difference in our ability to achieve what ought to be the objectives of reform:

1. To ensure that anyone legally residing in the country has access to adquate treatment when it is needed.

2. To eliminate the risk of financial instability arising from obtaining care -- in other words, treatment should not send anyone into bankruptcy.

3. Costs for the provision of treatment must be contained so they do not constitute a risk for the financial health of the nation.

What does a trigger for a public option has to do with any of those three objectives?

Posted by: Athena_news | September 21, 2009 11:48 AM | Report abuse

Apart from the amendment being pretty weak, it's got to be noted that a Republican proposed potential public option. Considering the GOP's crazy discipline and message control, even a pretty sucky proposal is surprising and something to work off of as the bill's get reconciled.

Posted by: Chris_ | September 21, 2009 11:55 AM | Report abuse

I am for the public option but I am not against the trigger if it is done right. I think that the trigger has potential if instead of 50 different states public plans, what will be triggered is for that state to go into the national public plan.

Plus I would have a more stringent trigger that would hold insurance companies feet to the fire.

Posted by: maritza1 | September 21, 2009 12:01 PM | Report abuse

Ezra writes: ****Color me unimpressed.*****

Well, Snowe's amendment itself isn't overly impressive -- I agree.

But I think the bigger story here is that at least one Republican is not only open to a public option (albeit not a very ideal one), but is actually pushing this legislation from the left. What tended to get lost in the weeds last week is that Snowe's principal criticism last week of the Baucus bill was that its subsidies were insufficient. Again, she's pushing from the left. Moreover, if, at some point, Democrats (and hopefully the media) are able to label the public component "The public option amendment of REPUBLICAN Olympia Snowe," that would be a non-trivial advantage. At the end of the day, at least one Republican is being reasonable and constructive. That's not nothing. The bigger picture is that this one Republican isn't cowed by her leadership. And why should she be? She's stunningly popular in Maine and could easily win reelection as a Democrat or an independent.

Posted by: Jasper99 | September 21, 2009 12:24 PM | Report abuse

This is pretty much what people expected out of the Snowe Trigger: one that won't get pulled. Ezra's question:

"The question, I guess, is how ingenious insurers will be at creating crappy plans that don't cover much but provide two "affordable choices" to delay the trigger."

They won't have to be ingenious. It was written with them in mind.


Posted by: toshiaki | September 21, 2009 12:31 PM | Report abuse

There is no way this doesn't come down to a party line vote. Obama just wants to get something--anything--done. Republicans would be fools to co-sign such an unpopular plan.

I expect Snowe will vote against the final package. If she supports it, then officially becoming Sen. Olympia Snowe (I-health care industry) can't be far behind.

Posted by: bmull | September 21, 2009 12:46 PM | Report abuse

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