What does a public option mean for private health insurance costs? How public health care will affect private costs.

While the health care debate rages on, individuals are asking, "What does it mean for my health insurance costs?" Ultimately, a system that reduces costs, expands coverage, and does so without collapsing the private health care system already in place benefits everyone. How we get there from here is the subject of intense debate.

What a "Public Option" Means for Health Care

A public option, at its most basic, is a health insurance plan run by the government instead of a for-profit company. The idea is that because the plan isn't designed to make a profit, it can offer insurance to consumers at a reduced cost. Therein lies the problem: private insurance companies believe that they will be run out of business by a government-run option that competes with their business. Pharmaceutical companies oppose the plan because if the public option grows to include a majority of Americans, it could strong-arm the drug manufacturers into lowering drug prices.

Because the public option is far from being approved, it's difficult to speculate what the plan will ultimately look like. However, if the plan succeeds in being a public-run alternative to private health insurance, it's likely that health insurance costs will go down across the board—not just in the public sector.

What Health Insurance Costs Now

The average cost of health insurance is, in itself, a hotly debated topic. The National Coalition on Health Care estimates the average cost of health care for a family of four is $13,000 per year, with the employee paying around $3,900 of this cost. However, many factors influence overall cost, so it's difficult to pin down a concrete figure.

The health care package currently being debated in Congress has measures to reduce the cost of health care which, in turn, reduces the cost of health insurance. Things like online medical records, tort reform, and the reduction of malpractice lawsuits will serve to bring the cost of private health insurance down with or without a public option. What will truly determine health insurance rates in the future is how robust the public option is.

Where do we go from here?

The United States Postal Service, the government-run public option for mail, is, at times, mired in bureaucracy. Its largess and inefficiency allows for heavy private competition. However, its presence in the market provides a constant competitive presence that keeps shipping rates down for everyone. Congress is attempting to apply these same principles to health care. Whether or not they succeed remains to be seen.