The “Public Option” in Practice

November 3, 2009 at 1:23 am (By Randy)

Florida has had a “public option” for homeowner’s insurance since not long after Hurricane Andrew rolled through the state in 1992. How’s that working out for them? Randall Holcombe at The Beacon gives us a hint:

As originally envisioned, [state-owned-and-operated] Citizens [Property Insurance Corporation]  would charge rates above those charged by private insurers, to make Citizens the insurer of last resort.

After two bad hurricane seasons in 2004 and 2005 property insurance rates in Florida rose…

Charlie Crist promised voters that if elected he would see that their property insurance bills “dropped like a rock.” [Crist was elected]

One tactic he used was to change Citizens’ rate structure so it was competitive with private insurers.

His idea … is that with a public option, private insurers would have to keep their rates in line or risk losing customers to the government insurer.

That’s what’s happened in Florida.

Today about 30% of homeowners’ policies are written by Citizens, which is the largest property insurer in the state.

It’s about to get bigger too.

Citizens is a fiscal time bomb.  Already, every Florida insurance policy (on homes, boats, cars, etc.) [not just homeowners policies] pays a surcharge that goes to Citizens, but Citizens still doesn’t have sufficient reserves to weather a major hurricane.  When one comes, Florida taxpayers will be on the hook for the bill.

In Florida, the public option has meant a substantial socialization of insurance, subsidization of the public option by those who take a private option, and the creation of  a fiscally-unsound public insurance company despite the subsidy.

As to why Citizens will only get bigger:

The largest private insurer, State Farm… is pulling out of the state altogether [over a three year period].

State Farm probably had 20% of the market in Florida. They are withdrawing because the state refused to allow them to adjust their rates.

Before anyone jumps the gun on those evil profit-mongers at State Farm, I’ll pass along a reminder that State Farm is a mutual insurance company owned by its policyholders, has no stock, paying any profits back to its policyholders in the form of dividends.

Can we learn anything from that experience that might portend what will happen once we have a “public option” for health insurance?

[Highlighting and lay-out changes are mine]


  1. jacksmith said,

    [EDITOR’S NOTE: This appears to be a spam response to the mention of the phrase “public option” but we’ll let that slide for now because it has some useful links and serves as a good example of a canned & planned campaign]

    Urgent!! Robert Reich on your healthcare

    Why A Strong Public Option Is Essential – By jacksmith – Working Class

    Robert Reich explains the pubic option:

    Hollywood Supports The Public Option :-)

    Beautiful HEATHER GRAHAM :-)

    It’s not just because more than two thirds of the American people want a single payer health care system. And if they cant have a single payer system 77% of all Americans want a strong government-run public option on day one (86% of democrats, 75% of independents, and 72% republicans). Basically everyone.

    It’s not just because according to a new AARP POLL: 86 percent of seniors want universal healthcare security for All, including 93% of Democrats, 87% of Independents, and 78% of Republicans. With 79% of seniors supporting creating a new strong Government-run public option plan, available immediately. Including 89% of Democrats, 80% of Independents, and 61% of Republicans, STUNNING!!

    It’s not just because it will lower cost. Because a strong public option will dramatically lower cost for everyone. And dramatically improved the quality of care everyone receives in America and around the World. Rich, middle class, and poor a like.

    It’s not just because it will save trillions of dollars and prevent the needless deaths of millions more of YOU, caused by a rush to profit by the DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX!

    It’s not just because every expert in every field, including economist, and Nobel laureates all agree that free market based healthcare systems don’t work. Never have and never will. The US has the only truly free market based healthcare system in the World. And as you all know now, IT IS A DISASTER!

    It’s not just because providing or denying medically necessary care for profit motivations is wrong. Because it is WRONG! It’s professionally, ethically, and morally REPUGNANT!, Animalistic, VILE and EVIL.


    The public option is ESSENTIAL because over 200 million of you are trapped in the forest of the wolves. Which is the forest of the DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX! With no way out except through needless inhumane suffering, and DEATH. While the wolves tear at your flesh, and rip you limb from lib. Then feast on your lifeless bodies like a dead carcase for transplant parts.

    At the most vulnerable times of your lives (when you were sick and hurting), millions of you have had to fight and loose cruel, but heroic battles. Fighting against the big guns of the DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX! in the forest of the wolves. All because you have no place else to go. You have no other CHOICE!

    But the PUBLIC OPTION will give you someplace safe to go. And it will give us someplace safe to take you. The public option will be your refugium (your refuge). Where the wolves cannot get at you when your down, hurting, and vulnerable. Where everyone who needs it can find rest, security, comfort and the care they need. Protected by the BIG GUNS of We The People Of The United States. THE MOST POWERFUL PEOPLE AND COUNTRY ON EARTH.

    This is why it is so critical that we do not lead another 50 million vulnerable, uninsured Americans into the forest of the wolves, without the protections of a Strong Government-run MEDICARE like public option. We The People Of The United States MUST NOT LET THAT HAPPEN to any more of our fellow Americans. If healthcare reform does not contain a strong MEDICARE like public option on day one. YOU MUST! KILL IT. Or you will do far more harm than good. And millions more will die needlessly. Rich, middle class, and poor a like.

    To those who would continue to obstruct good and true healthcare reform for the American people, and who seek to trap millions more vulnerable Americans in the forest of the wolves. We will continue to fight you. We are prepared to wage all out war against you, and will eagerly DESTROY! you. Time…is…UP! YOU HAVE BEEN WARNED! No Co-op’s! No Triggers! NO INDIVIDUAL MANDATES! without a Strong MEDICARE like public option on day one.

    Healthcare reform can be the GREATEST! Accomplishment of our time and century. A time when future generations may say of us, that we were all, AMERICAS GREATEST GENERATIONS.


    I therefore call on all my fellow Americans and the peoples of the World. To join us in this fight so that we may finish becoming the better America that we aspire to be for everyone.


    I have been privileged to be witness as many of you fought, and struggled to take your first breath, and your last breath on this earth. Rich, middle class, and poor a like. Life is precious.

    Whatever the cost. WE! MUST SUCCEED.

    God Bless You My Fellow Human Beings

    jacksmith – Working Class

    ATTENTION!! Congress Has The Votes Needed To Pass A Public Option – TODAY

    Things You Can Do To Help NOW!

    A majority of voters would rather have a Democrats only bill with a Public Option. Than a bipartisan bill without a Public Option.

    A state based insurance plan is NOT!! a Public Option. Nor is it a Strong, National, Medicare like Public Option.

    No Triggers!


    Krugman on heathcare (

    Senator Bernie Sanders on healthcare (

    John Garamendi on the Public Option and the Grassroots:

    Howard Dean on the Public Option

    We’re Number 37! in quality of health care

    Twitter search (#welovethenhs #NHS #hc09 #hcr #healthcar #obama #p2 #topprog #) Check it out.

  2. Troy V said,

    The story is actually worse that you paint here. FL legislature also created the FHCF after Andrew and also put the state in the reinsurance market at below market rates (1/10 of the market). It started out selling $6billion of reinsurance after Andrew and grew to $28billion after 2004-2005. They then forced all residential carriers to buy this discounted reinsurance and pass the lower costs on to the consumers. Most large national carriers saw through the FHCF as underfunded and unable to raise $28billion through bonds offerings (debt) and bought extra reinsurance to back up the reinsurance they were required to purchase from the FHCF. The FL OIR also did not allow any carriers to raise rates, forcing all national carriers to exit Florida. Most recently Allstate, Nationwide, State Farm, etc.

    Currently the FHCF has a $7billion funding gap, which is the difference between the amount of reinsurance sold less cash on hand less bonding capacity, leaving a bailout the only option for FL if we have a medium-large storm. Most insurnace companies sued the FHCF last year asking for a refund of premiums paid as the FHCF did not have the ability to pay on the reinsurance contracts sold.

    The other public option example currently in the market is Flood insurance through the NFIP. This is single peril policy (flood only) sold through various “write your own” carriers but wholly backed by the NFIP at subsidized rates set by the NFIP. Currently the NFIP is the only game in town for Flood insurance. However, this is another subsidized product and the NFIP is currently $20 billion in debt.

  3. amba said,

    Folks, this has triggered a political-spam response, a comment full of pro-public option links and statistics. What to do with one of those? I could delete it, but maybe it’s worth seeing the campaign on display? Please weigh in, meanwhile I’m holding it (cobloggers can take a look).

    I might add that it’s pretty funny. It thinks the endorsements of Hollywood and of “Beautiful Heather Graham!” may sway some, and it raves on in caps about the “DISGRACEFUL, GREED DRIVEN, PRIVATE FOR PROFIT MEDICAL INDUSTRIAL COMPLEX!”

  4. Randy said,

    Thanks, Amba! I approved it with an editorial note. It now appears as comment #1

  5. Icepick said,

    Can we learn anything from that experience that might portend what will happen once we have a “public option” for health insurance?

    Of course we can’t learn anything from this, because everyone’s mind is already set. (One side is more ‘right’ than the other, but that’s just happenstance.)

    Speaking of evil profiteers, one of Obama’s biggest supporters made a tidy $224,000,000 off of Florida in 2008 because of its underfunded insurance programs. That would be Warren Buffett. So there’s still a way for the fat cats to get even fatter off these programs designed to helo “the average citizen”. (And please note that Buffett would have won either way on his bet with Florida – it’s just a question of how much, and when he gets paid.)

  6. Icepick said,

    I’m too lazy to look it up, but fat cats are already getting their ducks in a row to profit off of government run health care. Steve Immelt at GE stands to be the biggest winner, IIRC. With that much money sloshing around someone will make several king’s ransoms, probably by having the right connections. Look to Tony Rezko and the fortune he (and to some extent Obama) made off of ‘public housing’ for the ‘poor’. Increasingly it looks like the French Solution may be the only way to resolve the problems with our government class.*

    *Admittedly my perceptions may be colored as Alan Grayson is my Congressman, There’s nothing like having a carpet-bagging, , uber-rich ‘populist’, sleazy bully of a lawyer as one’s representative from Congress to put one off the whole damned thing. (And I wrote that correctly; Grayson isn’t our Representative to Congress, he’s Congress’s Representative to us. That’s what ‘representative government’ means these days.)

  7. El Pollo Real said,

    Of course we can’t learn anything from this, because everyone’s mind is already set. (One side is more ‘right’ than the other, but that’s just happenstance.)

    You’re right. My mind hasn’t changed in over 3 months since I found out I going to be targeted. Link. The spammer who posted here brings nothing to the table IMO, except to show how whacky they are. I mean, a thoughtful post that begins with a discussion about the economic viability of proposed changes attracts a kooky comment that basically says we need all healthcare for all people all the time? There’s not even a thought about viability. How utterly thoughtless. This doesn’t even represent the “other” side from where I sit.

  8. amba12 said,

    I have a friend, my age, somewhat younger wife, one daughter in college, one in high school. He chose high deductible insurance, pays $17,000 a year for his family of four, and has a $10,000 deductible. You’re saying on top of all that he’d pay a penalty/tax. Do we know how much?

  9. El Pollo Real said,

    Those numbers seem high. Anyway, I’ve put the question directly to my Congressional Rep; he’s pretty good about getting back on these issues. I’ll let you know.

  10. El Pollo Real said,

    I have not been able to google any info on this myself, just propsed tax relief for businesses. Depending on how the answers to my questions come out from my inquiry, I might drop a lot of my personal resistance to the bill.

    To me, an HD insurance plan (coupled with an HSA) is a way of taking personal responsibility back. To penalize someone who does this strikes me as unfair, stupid, and short-sighted (so what else is new with regulation).

    Another pet peeve: all those people clamoring for a French-style system need to come clean about how that will translate into changes in end-of-life care.

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