GovernmentExecutive.com

Senate Finance Committee leaders Monday released three options for how to set up a government-run public health insurance option, ranging from basing it on a Medicare-style model to a state-by-state solution.

Suggestions from Senate Finance Chairman Max Baucus, D-Mont., and ranking member Charles Grassley, R-Iowa, on the public option include what they referred to as a "Medicare-like" plan that would be administered by a new Health and Human Services agency.

The public plan would be subject to the same rules as the private plans that participate in a health insurance exchange lawmakers want to set up to help consumers choose health coverage.

The public plan would pay healthcare providers anywhere from the same rate as Medicare to 10 percent more. Republicans have argued that a private plan would pay close to Medicare rates and threaten to price private insurers out of the market. The public plan would not have to meet solvency requirements.

The other two options Finance members will meet privately to discuss on Thursday are similar. But instead of an HHS agency operating the plan, either regional third-party administrators would or states operate their own public plan, potentially by allowing people to participate in state-employee plans. The third-party administrators would negotiate their payment rates for providers.

The options paper proposes employer and individual mandates to obtain coverage. The individual mandate would be enforced through a tax on a percentage of the premium for the cheapest coverage offered through the insurance exchange. The penalty would start out totaling 25 percent of the cheapest plan's premium and hit 75 percent in the third year and beyond.

The options paper seems to suggest an individual mandate is a given, while an employer mandate is subject to negotiations. The paper suggests a scenario where an employer mandate is not required, but individuals would be forced to purchase insurance in most cases.

The Main Street Alliance, a network of a dozen state small-business coalitions, plans to tell the Finance Committee Tuesday as lawmakers discuss financing a healthcare overhaul that it is willing to accept an employer mandate as long as a public option is included in the mix, Sam Blair, network director at the alliance said.

"The way our system works now, where responsible employers offer coverage and others don't, it leaves us in a situation with an unlevel playing field," the alliance wrote to Finance Committee members. "If we're contributing but other employers aren't, that gives them a financial advantage over us. We need to level the playing field through a system where everyone pitches in a reasonable amount."

Stephanie Cathcart, a spokeswoman for the National Federation of Independent Business, said the federation disagrees. "The Main Street Alliance is hardly representative of small business," Cathcart said.

Blair argued the alliance formed out of groups that did not feel represented by national organizations like the federation.