Krugman's column todayon health insurance and the public option does a good job of explaining why the public option is necessary to any real health care reform. Maybe I'm going to be Captain Obvious here, but it's easy to forget the primary reason why government intervention in this industry is necessary> Krugman alludes to it, but I'm just going to say it.
Insurance companies are not in business to provide payment for medical services.
In fact, providing payment for medical services is the last thing any insurance company actually wants to do. Insurance companies are out to make money, first, last and always--that's their primary responsibility under their corporate charters--and you don't make money by paying claims unless you absolutely have to. You make money by promising to pay claims, collecting premiums, and then throwing up every possible roadblock to avoid paying the claims you promised you'd pay. It's an incredible scam when you cut through all the crap.
When you're healthy, your health insurance company loves you--well, they love the premiums you're sending in at least. But when you're sick, they hate you, and it doesn't matter how long a history you have with the company. You're a drain on their resources, a fraction of a tick downward on their profitability for the quarter, a few pennies less for the bonuses for the top executives. You, in short, are the enemy.
A public option won't change the attitude, but it will offer individuals and business owners a different option, one without shareholders to answer to, and that scares the ever-loving crap out of the insurance industry, because they know that if there's a legitimate public option out there, they can't compete and keep raking in the billions of dollars in profits they've gotten by denying claims and cherry-picking healthy people to cover. The insurance industry seems to understand that if a public option comes out of this, then it's only a matter of time before that option turns into de facto single-payer, and they have to find legitimate work. And oh, won't that be terrible for them?