The new compromise being touted by Democrats is based on the Federal Employees Health Benefit Program that provides coverage for members of Congress and other government employees. Several public option opponents, including Senator Lieberman, seem to like the plan. But Michael Tanner of Cato notes that the cost of FEHBP plans is actually going up more rapidly than that of other plans:

In using the FEHBP as a model, however, Democrats have chosen an insurance plan whose costs are rising faster than average. FEHBP premiums are expected to rise 7.9 percent this year and 8.8 percent in 2010. By comparison, private-insurance premiums will rise on average by 5.5 to 6.2 percent annually in the next few years, the Congressional Budget Office predicts. In fact, FEHBP premiums are rising so fast that nearly 100,000 federal employees (who pay 30 percent of their plans’ premiums) have opted out of the program.

FEHBP members are also finding their choices reduced. Next year, 32 insurance plans will either drop out of the program or reduce their participation. Some 61,000 workers will lose their current coverage.

Tanner points out other drawbacks to this latest slapped-together compromise. Quoting the Robert Woods Johnson Foundation, he says that there would be an “adverse selection” — new clients would tend to be sicker than current ones. This would drive up premiums even faster than they are already rising. The entire state-employee health system of Tennessee was nearly wrecked a decade ago by trying something similar.

Tanner quotes a former OPM director saying of the new system that “ultimately, it would break the system.” Premiums will end up being beyond the means of many people without taxpayer-funded subsidies.