Obama: Health Insurance Companies Won't Go Out Of Business

The Association of Health Insurance Plans and Blue Cross Blue Shield had earlier warned in stark terms that employer coverage may die if the Obama administration passes the proposed government controlled health insurance reforms.

The two associations whose health insurance plans cover 200 million Americans don’t believe that the government’s proposed health care reforms including a government insurance plan can compete fairly with private companies in a rejuvenated health care market.

The two insurance giants wrote a joint letter to senators urging them to prevail over Obama’s health insurance reforms. Release of the letter came as negotiations between key Senate Democrats and Republicans over health insurance co-ops as a substitute to a government-run health plan were at a deadlock.

"A government-run plan no matter how it is initially structured would dismantle employer-based coverage, significantly increase costs for those who remain in private coverage, and add additional liabilities to the federal budget," read the joint letter from AHIP and Blue Cross.

The parties are currently negotiating how much control the federal government should have in the creation and running of the co-ops. "Recognizing the substantial disruption to consumers and health care providers that a government plan based on Medicare would create, some policymakers are looking at alternatives that would attempt to achieve a level playing field,” the letter warned.

Recent polls show that Obama’s health care plan is well liked by the public. Supporters of a public plan say that competition would force private insurers to cut administrative costs and profits, making health insurance coverage more affordable to most Americans.

However, Insurers consider Obama’s proposed health Insurance scheme to be a deviation from the promise he made than Americans can keep the coverage they have. According to their joint letter, the major insurers prefer a tighter government regulation to protect consumers.

“Regardless of how it is initially structured, a government plan would use its built-in advantages to take over the health insurance market," warned the lobbyists.

The current negotiations between the Democrats and Republicans seem to be the only hope for a bipartisan compromise. Democrats favor heavy federal presence to ensure the co-ops can compete sufficiently with the big health insurers and help cut down costs, but Republicans say they will back co-ops provided that Washington maintains little control.

Most critics to Obama’s proposed health insurance reforms argue that such a plan would eventually lead to just one, government-controlled health care system—a scenario that many Republicans and some Democrats are basing their opposition on.