Obama Administration Signals Room to Compromise on Public Option

President Barack Obama and some of his administration's chief spokespeople for health reform have pulled back slightly on their calls for a government-run insurer as a necessary component of pending health legislation.

In remarks over the weekend from Obama, Health and Human Services Secretary Kathleen Sebelius and White House spokesman Robert Gibbs, the so-called "public option" was painted as more of a preference than a requirement.

At a Colorado town-hall-style event on Aug. 15, Obama was asked how private companies would be able to compete against a government-supported insurer. "It is true that there are certain costs associated with a private business that a government would not have to worry about," Obama said. "I think there are ways that we can address those competitive issues." He said that he's trying to dispel the idea "that somehow just by having a public option you have the entire private marketplace destroyed is just not borne out by the facts. And in fact, right now you've got a lot of private companies who do very well competing against the government." Then he said something that could be a hint of good news for the insurance industry: "The public option, whether we have it or we don't have it, is not the entirety of health care reform. This is just one sliver of it, one aspect of it."

That seems to contradict the president's earlier advocacy for a public option that was a central, necessary piece of the reforms.

On the Sunday political talk shows, Sebelius argued that the important thing is choice and competition, that the public option is "not the essential element." She said she believes, in the end, there will be a competitor to private insurers. But she didn't say that competition must come from a government-run enterprise.

One of the chief components of the legislation now being negotiated by a bipartisan group of members in the Senate's Finance Committee is a system of health-insurance co-ops -- independent nonprofits operating with financial support from the government. Because of that provision, the legislation promises to be different than any of the other versions that have already emerged from three House committees and one other Senate committee.

Gibbs, on another political talk show, suggested the important thing is competition of some kind. "What the president has said, in order to inject choice and competition, which will drive down costs and improve quality, that people ought to be able to have some competitor in that market," Gibbs is quoted as saying in a transcript. "There ought to be a choice that they have. The president has thus far sided with the notion that that can best be done through a public option."

When the stock market opened in the morning on Aug. 17, health insurer stocks rose on the news of these statements, which suggest more room for compromise. In early afternoon trading, the A.M. Best U.S. Health and HMO Insurance Index had increased 15.60 points -- up 1.88%. It was the only AMB stock index that was up as of midday.