...allows states to negotiate with insurers on behalf of people between 133 percent and 200 percent of the poverty line (interview here). This seems like a perfectly fine policy idea. But it's entirely orthogonal to the public option debate. It doesn't create competition or transparency or experimentation. It makes health-care insurance cheaper for a small slice of people, but that's really it. Worth doing, but not an answer for those who want to see a public competitor.

“Hard-working Americans deserve choices for better coverage in the private insurance system,” said Cantwell. “My proposal in no way substitutes a robust federal public option, which I will continue fighting for, but clearly demonstrates how powerful the government can be in negotiating on behalf of consumers.”

Cantwell Amendment Provides More Competition in Health Care Marketplace

Committee Passes Cantwell’s Public Plan Giving States Unprecedented Negotiating Power to Provide Quality Health Care at Lower Costs

WASHINGTON, DC — Today the Senate Finance Committee passed an amendment to the America’s Healthy Futures Act of 2009 sponsored by U.S. Senator Maria Cantwell (D-WA) that will for the first time provide states with the ability to negotiate with health insurers in order to provide high quality health care coverage at a lower cost. Rather than handing tax subsidies to insurance companies, Cantwell’s amendment directs this money to the states, and lets them use their purchasing power to negotiate with private insurance carriers. Modeled after Washington state’s Basic Health Plan, which has a 20-year track record of reducing costs and providing quality care, Cantwell’s plan could provide coverage to 75 percent of the uninsured population.

“We know that the individual insurance market doesn’t work for people making less than $50,000 a year,” said Cantwell. “This proposal is about giving federal dollars to the states and putting them in the driver's seat. It is a public plan, but negotiated with the private sector. We are going to everything we can to drive down the costs of insurance for the citizens of this country and at least this amendment is a start.”

Under the original Chairman’s mark, people with income between 133 and 200 percent of the poverty level would have been eligible for tax subsidies to help them afford individual insurance coverage. Cantwell’s plan, redirects these revenues to the states so they can negotiate and cover this group in a more cost effective way, all without sacrificing the level of benefits.

Right now, these people are the most disadvantaged in the individual insurance market and would be left to fend for themselves against the insurance companies. According to data released in July 2009 by the Commonwealth Fund, a private foundation: adults with low incomes who sought coverage on the individual market were the least likely to enroll in a health plan; 85 percent of adults with incomes under 200 percent of poverty who tried to buy coverage on the individual market, never purchased it; and, more than one-third of adults who had ever sought coverage in the individual market were turned down by an insurance carrier, charged a higher price, or had a specific health problem excluded from their coverage.

The states’ negotiators know the number of people they need to cover and the benefit packages they need to get, and therefore are able to bargain on behalf of this group with insurers to get premiums as low as possible. Insurance providers are apt to negotiate with states because it provides them with a new pool of customers.

An independent trust would be established in each state to handle the funds. States would be encouraged to negotiate with multiple providers, including any public option choice that becomes law, so individuals would have a choice of multiple state-negotiated coverage plans. Any money left over after negotiations would not be transferrable into the state’s general fund; and this proposal is not an expansion of the Medicaid program.

“Hard-working Americans deserve choices for better coverage in the private insurance system,” said Cantwell. “My proposal in no way substitutes a robust federal public option, which I will continue fighting for, but clearly demonstrates how powerful the government can be in negotiating on behalf of consumers.”