The next time a pundit claims that a public option will put private health insurance companies out of business and lead to socialized health care, I hope someone asks them how UPS, Fedex, and hundreds of other smaller delivery companies are still in business, despite having to compete with the US Post Office.

This is actually a good analogy, since the USPS provides universal service — delivering letters to anywhere in the US for the price of a stamp (even remote locations) — while private companies provide enhanced services to those people who are willing and able to pay more. This is how it should be with health insurance (and is how it works in countries like New Zealand). The government provides universal coverage for a basic price, while private health insurance companies compete with enhanced services (i.e., they could cover elective procedures that the public plan doesn’t).

Imagine the outcry if the Fedex and UPS insisted that the US Post Office be abolished, while retaining the right to refuse delivery to locations that they determined were too expensive to service. Sorry, that check you wanted to send to your daughter spending the summer in Alaska — no can do! Or imagine if there were hundreds of delivery companies and each one had different complex rules and addresses to which they deliver, and purposely tried to figure out how to not deliver your letters. Sorry, you used a USPS zip code, and ours have 23 digits — into the trash! Would that be that different from the situation that doctors and patients now find themselves in dealing with health insurance companies?

Of course, if delivery services were run like health insurance companies, you would have to pick one company to use (or your employer would pick it for you) and you couldn’t switch companies, even if they didn’t deliver to the address to which you wanted to send something. Naturally, their prices would increase 10% every year. And you couldn’t send “preexisting packages”.

The truth is that the health insurance industry doesn’t want to have to compete. How then could they continue to charge so much more for health care, pocketing the extra money while providing terrible service and results?

UPDATE: There are other analogies that work as well. Like how public schools (especially public universities) coexist with private ones. Arguments about whether the USPS is efficient or a good use of resources are completely irrelevant to the analogy. The point is that when someone says that a public option cannot be allowed because it would necessarily drive private insurance companies out of business, they are absolutely wrong (unless by “business”, they mean making obscene profits and providing mediocre service).

UPDATE 2: This post has spawned a huge discussion over at Reddit.