VIEWPOINT Public Coods, Public Utilities, and the Public's Health Samuels. Flint T he battle over dismantling health reform dominates today's health policy agenda. Some opposition to the Patient Protec- tion and Affordable Care Act (PL. 111-148)—now typically referred to as the Affordable Care Act (ACA)—comes from those on the political left who see health care as a public good similar to the military, the fire department, and the court system (Physicians for a National Health Program, 2010). Only government can fund and deliver public goods, because the private market cannot be relied on to do so with the equity and efficiency required for critical services needed by everyone. Many on the political right fear "a government takeover" of the health care system that will lead to the loss of the very market-driven, creative solutions that are so desperately needed to reign in the cost escalations that threaten to make health care unaffordable. I see the ACA as a politically shrewd compromise that captures the principal benefits of both camps and creates the least disruptive path to a workable framework that can ultimately lead to universal health insurance coverage at sustainable prices. This middle ground is achieved through the ACA's requirements shifting the health care system from a lightly regulated market commodity to a heavily regulated public utility. Public utilities are privately owned firms that provide necessities in monopoly or near-monop- oly situations. Because unfettered monopolies can price gouge, they are required to accept extensive government regulation to ensure that they do not abuse their market power. Some public utilities are complete monopohes (for example, regional electric, water, and gas companies),and others (for example, cable television, telecommunications) have some modest competition. However, all public utilities are profit-driven, privately owned businesses, which distinguishes them from public goods that are funded and operated by the public sector. Public utility regulation has two fundamental characteristics. First, all utilities are legally obligated to serve virtually everyone, despite the known unprofitability of certain customers and customer groups. All customers are allowed to use as much of a utility's services as they like, with occasional ex- ceptions such as temporary limits on lawn watering during droughts. Second, the prices that are charged to consumers are determined by public commis- sions rather than private corporations. Public utility commissions have essentially unrestricted access to a firm's books.This provides them with far greater insight into a company's financing than is required of publicly held companies, let alone privately owned businesses and other proprietorships. Contrast that environment with how health insurers operated up tiO now. Insurers could select their customers and set their own prices, like any other seller of goods and services in a private mar- ket. Insur ...

1. VIEWPOINT
Public Coods, Public Utilities,
and the Public's Health
Samuels. Flint
T
he battle over dismantling health reform
dominates today's health policy agenda.
Some opposition to the Patient Protec-
tion and Affordable Care Act (PL. 111-148)—now
typically referred to as the Affordable Care Act
(ACA)—comes from those on the political left
who see health care as a public good similar to the
military, the fire department, and the court system
(Physicians for a National Health Program, 2010).
Only government can fund and deliver public goods,
because the private market cannot be relied on to
do so with the equity and efficiency required for
critical services needed by everyone. Many on the
political right fear "a government takeover" of the
health care system that will lead to the loss of the
very market-driven, creative solutions that are so
desperately needed to reign in the cost escalations
that threaten to make health care unaffordable.
I see the ACA as a politically shrewd compromise
that captures the principal benefits of both camps
and creates the least disruptive path to a workable
framework that can ultimately lead to universal

2. health insurance coverage at sustainable prices.
This middle ground is achieved through the ACA's
requirements shifting the health care system from
a lightly regulated market commodity to a heavily
regulated public utility.
Public utilities are privately owned firms that
provide necessities in monopoly or near-monop-
oly situations. Because unfettered monopolies can
price gouge, they are required to accept extensive
government regulation to ensure that they do not
abuse their market power. Some public utilities are
complete monopohes (for example, regional electric,
water, and gas companies),and others (for example,
cable television, telecommunications) have some
modest competition. However, all public utilities
are profit-driven, privately owned businesses, which
distinguishes them from public goods that are funded
and operated by the public sector.
Public utility regulation has two fundamental
characteristics. First, all utilities are legally obligated
to serve virtually everyone, despite the known
unprofitability of certain customers and customer
groups. All customers are allowed to use as much of
a utility's services as they like, with occasional ex-
ceptions such as temporary limits on lawn watering
during droughts. Second, the prices that are charged
to consumers are determined by public commis-
sions rather than private corporations. Public utility
commissions have essentially unrestricted access to
a firm's books.This provides them with far greater
insight into a company's financing than is required of
publicly held companies, let alone privately owned
businesses and other proprietorships.

3. Contrast that environment with how health
insurers operated up tiO now. Insurers could select
their customers and set their own prices, like any
other seller of goods and services in a private mar-
ket. Insurers do contend with some government
regulation handled primarily at the state level, but
these regulations are limited to issues such as fiscal
solvency requirements, state-mandated benefits,
"patient protection laws" for managed care plans, and
truth-in-advertising and other marketing practices.
However, state regulation does not address consumer
accessibility or pricing.
In 1996, enactment of the Health Insurance Por-
tabUity and Accountability Act (HIPAA) (PL. 104-
191) created federal-level regulation for insurers in
the large-group and self-insured employer markets.
HIPAA requires insurers to cover all group members,
regardless of preexisting conditions, and to renew
all insurance plans, regardless of claims experience.
However, HIPAA's impact is limited in that it does
not address pricing.This makes guaranteed issue and
guaranteed renewability a hollow promise, because
annual premiums can be hiked at the whim of the
insurance company. Undesirable clients can simply
be priced out of the market. And HIPAA does not
CCC Code: 0360-7283/11 $3,00 O2011 National Association of
Social Workers 75
apply to the individual and small-group markets, the
areas where consumer rights are most constrained.
The ACA introduces a new level of insurer regu-

4. lation so strict that it moves the health insurance
industry out of the free market industry and into the
heavily regulated public utility world. As a condition
for participation in the forthcoming health insur-
ance exchanges, the ACA requires insurers to serve
everyone at standard community rates, with some
price variation permissible. Covered beneficiaries
will be insured for as much medically necessary
care as they require because lifetime benefit caps
are outlawed.
The ACA establishes price controls through state-
level health insurance rate review. States are allowed
greater visibility into insurers' accounting records
than current rules permit, and, most important, the
ACA enacted mandatory medical loss ratios (MLRs)
that give state-level rate setting real teeth.
The MLR is not a new concept. It is simply the
percentage of aggregate premium dollars paid by
insurers for actual medical care used by beneficia-
ries. Remaining premium revenue is considered an
administrative expense for costs such as marketing,
office equipment, employee compensation, and prof-
its. Currently, insurers regularly report their MLR
by market segment to state insurance commissions;
and at least two states, California and New Jersey,
have tninimum MLRs of 85 percent and 80 percent,
respectively (Henry J. Kaiser Family Foundation,
2008; U.S. Senate Committee on Commerce, Sci-
ence, and Transportation, 2010).
The ACA calls for MLRs of 80 percent for the
individual and small-group markets and 85 percent
for large-group markets—hardly draconian stan-
dards. In 2009, the mean MLRs for the six largest

5. commercial health insurers were 85.1 percent in
the large-group market and 81.2 percent in the
small-group market. The individual market, which
accounts for less than one-tenth of aggregate premi-
ums, had a considerably lower MLR of 73.6 percent
(U.S.Senate Committee on Coinmerce,Science,and
Transportation, 2010). Nonetheless, ACA standards
are manageable industry targets, because insurer
risks (and, consequently, insurer premiums) for the
individual market will be reduced when health
insurance exchanges are operational and a larger,
more stable group is created for those currently in
the individual market.
Under the ACA, if an insurer is not paying out
the prescribed percentages of premiums for medical
care, they must provide cash rebates to covered ben-
eficiaries.This mechanism should effectively prevent
excessive compensation and corporate profit, and it
places the health insurance industry squarely in the
public utility sector of the economy.
Finally, for those who are frustrated that the
ACA does not provide universal coverage from the
outset, a review of European health care systems
is encouraging. There is a rampant misperception
that "sociahzed medicine" throughout the rest of
the industrialized world means a monolithic single
payer (the government), with publicly owned hos-
pitals and salaried physicians employed by the state.
That is a myth.
The Dutch, Germans, and Swiss enjoy universal
coverage at considerably lower costs than those
in our country, with well-functioning, private,

6. niultipayer insurance systems that purchase care
from privately owned and operated provider health
systems and individual physicians. As in the ACA
plan, beneficiaries are insured through local health
insurance exchanges, with no"public option" used to
hold down prices (Schoen,Helm,& Folsom,2009).
There are uniform quality benchmarks, and provider
reimbursement rates are negotiated for all payers, a
method of determining provider payment rates that
is growing in popularity here in the United States
(Stremikis, Davis, & Guterman, 2010).
There is no denying that the ACA falls short
on universality, the top reform priority for health
advocates. However, it creates a framework that can
expand decent insurance coverage to all Americans
over time. I was pleased that NASW, a staunch single-
payer supporter, swallowed hard and ultimately
endorsed the ACA, even after the public option
had to be jettisoned from the plan due to politi-
cal pressure (Gorin, 2010). If the rest of the parties
debating the fate of the ACA could similarly lower
their voices and study the actual elements of the
legislation, I believe there would be more apprecia-
tion of just how effective the public utiHty model
can be in resolving many of the nation's health care
system ills. ITH?!
REFERENCES
Gorin, S. H. (2010).The Patient Protection and Afiordable
Care Act, cost control, and the battle for health care
reform [Editorial |. Heahh & Social Work, 35, 163-166.
Health Insurance Portability and Accountability Act of
1996, PL. 104-191, 110 Stat. 1936 (1996).

7. Henry J. Kaiser Family Foundation. (2008, September 3).
Proposed medical loss ratio requirement in California would
not address rising health care costs, insurers say (Kaiser
76 Health & Social Work VOLUME 36, NUMBER i
FEBRUARY 2011
Daily Health Policy Report). Retrieved from h t t p / /
wwv.kaisernetvork.org/daily_reports/print_report.
cfm?DR_ID=5426ñ&dr_cat=3
I'atient Protection and Affordable Care Act, PL. 111-148,
119-124 Stat. 1025 (2010).
Physicians for a National Health Program. (2010, March
22). Pro-single-payer doctors: Health bill leaves 23 million
uninsured—A false promise of reform [Press release].
Chicago: Author.
Schoen, C , Helms, D., & Folsom, A. (2009, December).
Harnessing health care markets for the pubtic interest:
Itisightijor U.S. health reform from the German and
Dutch muhipayer systems (Publication No. 1352). New
York:The Commonwealth Fund.
Stremikis. K., Davis, K., & Guterman, S. (2010, October).
Flealth care opinion leaders' views on transparency and
pricing (Publication No. 1451). NewYork:The
Commonwealth Fund.
U.S. Senate Committee on Commerce, Science, and
Transportation. (2010, April 15). Implementing health
insurance reform: New tnedical loss ratio information for

8. policymakers and consumers (Staff R e p o r t for C h a i r m a n
Rocketeller). Retrieved trom http://www.pnhp.org/
sites/default/files/docs/2010/MLR-Report.pdf
Samuel S. Flint, PhD, MSM^ is assistant prcfessor and as-
sociate director. School of Public and Environmental Affairs,
Indiana University Northwest, Gary, IN 46408; e-mail:
[email protected]
Original manuscript received November 12, 2010
Accepted November 12, 2010
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