"If insurance companies know people will be forced to buy policies, why would they lower premium prices?" Asks eegeterman over Twitter. "Why wouldn't they RAISE prices?"
I've been hearing this a bit today, so let's talk it through. In a world of one private insurance company and an individual mandate, it makes perfect sense. In a world of exchanges, with a dozen competing insurance plans, including national nonprofits, it doesn't.
Greg Mankiw has an interesting column on the public plan option; you've already seen related points on his blog and on MR.Today I'm interested in a slightly different question, namely the potential benefits of monopsony. Imagine a benevolent single buyer of health care services. Forget about whether or not it could be a government; let's just focus on the logic of the model. I can think of a few scenarios: