Okay, this is alarming news. RJ Eskow mentioned the possibility of this in his Huffington Post item the other day, but it looks like the CBO agrees. They're suggesting that the public option premiums from the House bill could end up becoming more expensive than the private plan premiums in the exchange.

Ezra explains:

...the public plan will pay prices equivalent to those of private insurers and may save a bit of money on administrative efficiencies. But because the public option is, well, public, it won't want to do the unpopular things that insurers do to save money, like manage care or aggressively review treatments. It also, presumably, won't try to drive out the sick or the unhealthy. That means the public option will spend more, and could, over time, develop a reputation as a good home for bad health risks, which would mean its average premium will increase because its average member will cost more.

Now, as I take a deep breath, I hasten to note that this isn't set in stone. Once the public option is passed into law, it will surely go through a variety of tweaks -- filling in loopholes and closing gaps. Actually, it'll probably go through further changes between now and final passage. I hope one of those changes is a clause to make sure the private insurers in the exchange can't use the public option as a toilet.

Also, private insurers won't be allowed to discriminate based upon pre-existing conditions, nor will they be able to engage in rescission. And there are guaranteed benefits and a risk adjustment apparatus in the exchange. It's in the law. So it seems like the private insurers in the exchange would have to zero in on a very narrow loophole through which to dump sick and at-risk customers. And a loophole that small should be easy to repair.