[Schneed10]

What are they doing?: Offering an OPTIONAL non-profit insurance coverage option through an online marketplace.

Why?: Insurance premiums are primarily driven by the number of people who belong to the plan. The more in the plan, the lower the premium (because then the insurance plan has more negotiating power with hospitals & docs and can demand lower reimbursement rates to providers). But if you work for a small business or if your employer offers terrible coverage, you end up in a very small "risk pool" (the number of people in your plan), which results in very high premiums. The online marketplace allows you to join a plan (or risk pool) with a large group of people.

How will they do it? The how part is very interesting. Obama said a non-profit insurance firm would have much lower overhead costs, because they won't need to generate a profit for Wall Street, and because they'll be able to reduce administrative costs. I buy the first part, that there will be no profits - that does help. But I don't buy the reduction of administrative costs. He underestimates how much regulation must be worked through within this industry - a non-profit will have just as much administrative overhead to work through, and will need just as many people to do it. And that assumes they'll operate with the same efficiency as a for-profit (I don't like those chances).

How will it help? Even if administrative costs can't be cut out, this still should give Americans with a semi-affordable coverage option. I just don't think it will be as cheap as he thinks, and plenty of the currently uninsured will still find it tough to afford. But it will still be better than options availabe now.