The Obama government has evoked fear in the hearts of private insurance companies with an improved Medicare plan. This federal government provided health plan is supposed to be so strong that it might wipe out the private insurers. Employees in America are provided a choice between Medicare and health insurance by most employers. If such a strong insurance is provided by the government, many individuals might not want to go in for the more expensive private insurance companies.

What the media reports

The New York Times writes that a study made by 2 different policy research groups in 2002 had drawn a conclusion that the federal program/state employee health plans have been able to control costs more successfully than private insurance companies. Most self insured employee plans provided by the state government have their financial risks managed by big private insurers. These insurers settle payment dealings with hospitals as well as doctors.

What is the effect of such competition?

By setting such tough competition for the private insurance market, President Obama intends to introduce more competition on to the health care market and hence keep insurance companies sincere. There are of course divided opinions on this plan. There are differences in opinion regarding the resemblance between the public plan options and the state employee plans.

Who will finally survive?

Since there is an existence of both private and public health insurance options within the state employee benefit plan, there is no doubt that this can be implemented. A state plan covers more than three million workers. Till date, in most of the state offered self insured plans the option provided is a Preferred Provider Organization (PPO) in close competition with Private Health Maintenance Organizations.

According to critics a public plan is bound to begin with an unfair pricing benefit since the need to produce profits is nil and the administrative costs are low. However, if the public plans can pay the doctors at levels which are at par with Medicare and offer low rates in insurance, then these plans could quickly grab the insurance industry.

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