ATLANTA — In the two weeks since the Senate majority leader, Harry Reid, embraced a proposal that would allow states to opt out of a new government health insurance plan, state leaders have begun debating whether to participate, and the question has emerged as a litmus test in a number of campaigns for governor.
The proposal, which is being woven into the Senate’s health care legislation, would shift some power over restructuring health care to the states and would foist upon state leaders the burden of a choice that, in some instances, could pit principle and politics against pragmatism. States would only be given the right to opt out of the public plan, not from the tax increases needed to subsidize coverage for the uninsured.
The bill that passed the House of Representatives on Saturday night includes a nationwide public plan without an opt-out provision, a difference that would be settled by a conference committee.
Several state officials said that if Mr. Reid’s proposal carries the day, many governors are very likely to accept the new plan rather than incite a bloody ideological battle mirroring the current health care fight in Congress.
Governors have other deep-seated concerns about the health care legislation, particularly whether states will be left holding the bag for a vast expansion of Medicaid. But many see little to gain from denying constituents an insurance option that could help slow the growth of premiums at no immediate cost to the state.
“If there’s something out there that might be beneficial to states, I expect states would likely opt in,” said Gov. Jim Douglas, Republican of Vermont, the chairman of the National Governors Association. “I mean what’s the harm, they likely will conclude, it’s only an option.”
But in some conservative states, the public option — which critics portray as the camel’s nose under the tent of fully nationalized medicine — is so anathema that lawmakers and governors may choose to stand against it. Lawmakers in 11 states have already introduced measures aimed at blocking other elements of the federal health legislation, like mandates that individuals have insurance and that most employers provide it, according to the National Conference of State Legislatures.
As states consider the public option, the critical factors, besides local politics, may include the size of a state’s uninsured population and its marketplace competition. States vary greatly in the number of health insurers, and because they require adequate risk pools, too many competitors — as well as too few — can be detrimental.
“Insurance is the law of big numbers,” said Sandy Praeger, the state insurance commissioner in Kansas. “If you divide the pie up too many times so you don’t have a sufficient number of insured it’s hard to keep costs under control.”
Ms. Praeger predicted that Kansas’ conservative legislature would opt out of the public plan because the state has five active health insurers.
Here in Georgia, the state insurance commissioner, John Oxendine, a Republican candidate for governor in 2010, said he “would lean extremely, extremely strongly to opting out.” and has challenged competitors in both parties to take a stand (while refusing to take an absolute one himself).
Under Mr. Reid’s proposal, the public option would be offered starting in 2013 alongside private insurance plans in a new government marketplace, or exchange. Critics argue that it would undercut private insurers and drive them from the market, eventually leaving the government as the sole insurer.
Mr. Reid, of Nevada, has released few details of his plan since announcing his intent on Oct. 26. Then, as now, Senate negotiators were working to merge separate health care bills passed by two committees, one with a public option and one without. In a concession to commercial insurers, Mr. Reid said his public plan would negotiate payment rates with doctors, hospitals and other providers rather than paying lower rates pegged to Medicare reimbursement levels.
That is also the case in the bill that passed the House. Because provider payments would be negotiated, just as they are with private insurance, the Congressional Budget Office estimates the public plan would attract only six million of the 30 million consumers who would buy insurance on the exchanges.
Its analysis also projects that premiums for the public option might be “somewhat higher” than those for private coverage because enrollees presumably would be less healthy.
Although the effective date for a public plan is still four years away, there are 37 races for governor next year that will determine who will be in office if the issue lands in state capitols. In 20 of those races, incumbents will not be eligible to seek re-election. When the Republican victors of last week’s elections in New Jersey and Virginia take office, there will be 26 Democratic governors and 24 Republicans.
The opt-out question was raised in the final week of each of those campaigns. In New Jersey, Gov. Jon S. Corzine, a Democrat, announced he would not opt out, while Christopher J. Christie, the Republican who defeated him, said he did not favor a public option. In the final debate of the Virginia race, the Republican candidate, Robert F. McDonnell, said he would opt out and his Democratic opponent, R. Creigh Deeds, said he would consider it.
Some Democrats running in red states have come out against the public option, like Representative Artur Davis, who is campaigning for governor of Alabama and voted against the House bill on Saturday. Others will not take a stand until the legislative picture in Washington becomes clearer.
In Florida, Attorney General Bill McCollum, the Republican frontrunner for governor next year, said he believed a public option would “put the viability of private health insurance in grave question.” But he also said he was not prepared to support opting out. Mr. McCollum said he feared that once insurers could not deny coverage based on pre-existing conditions — a centerpiece of the Democratic legislation — private insurers might not survive without a government plan to share the riskiest customers.
He has been pressing his likely Democratic opponent, Alex Sink, the state’s chief financial officer, to take a position on a public option. She has avoided doing so, saying “it makes little sense to predict how Florida would respond until we have hard information about the bill’s requirements and options.”