To compile the report, the actuaries assumed that any government program would operate on a level playing field with private insurers and not have rate-setting authority as Medicare does. Indeed, health care reform legislation introduced into the House last week stipulates that the government plan should negotiate rates directly with providers.
“Substantial capital is required to fund health care co-ops or a public plan over the first 10 years of development and operations,” the report states. “Under the limited scenarios modeled, start-up capital requirements ranged from approximately $1.7 billion to $45.6 billion.”
The great discrepancies in cost were the result of variances in projected enrollment and pricing. Yet, under all scenarios, the new plans would need to raise capital rapidly in order to meet solvency requirements. What’s more the study found little difference in capital needs between co-ops and a public plan. “Start-up capital is required to cover pre-operational start-up expenses and to meet prudent risk capital standards until co-ops or a public plan generate needed capital growth from operational earnings.
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