Explain government run health insurance plan contract

I was looking at the contract specific rules for this contract and I noticed that multiple clarifications have been made to specify that various compromise ideas do not count as a public option. Can you offer any kind of generalization of what counts and does not count as a public option, so that people do not have to worry about future "clarifications" affecting prices?

Has Intrade even confirmed that the House tri-committee bill (HR 3200) and the Senate HELP Committee bill count as public options?

Intrade wrote this response on this Forum on October 7th:

Intrade wrote:

The market is for the establishment of a government run health insurance plan, otherwise known as the "public option".

If such a plan is passed into law before the date on the contract then the contract will expire at 100, if not then it will expire at 0.

The contract is not for the passage of a health care reform bill, but only for the creation of a "public option".

Two days later, this clarification was posted within the Contract Rules:
"If a system is established that allows states to opt-in or opt-out of a government run health care plan the contract will not be expired at 100. (added 09/10/09)."

The two statements implicitly contradict each other. According to the first, the contract will expire at 100 if a health reform bill passes which includes a government-run health insurance option. According to the second, the contract "will not be expired at 100" if states are allowed to opt-in or opt-out of the government-run health care plan.

The rub is, the following clarification was posted one month before:
"For the purposes of this market any public option must be national for the contract to expire at 100. If it was offered in certain states then not others then the contract would not be expired at 100 (added 08/09/09)."

So Intrade was forced to make the October 9 clarification in order to remain consistent with their September 8 clarification. Or so I imagine they felt.

This seems to me to be a clear case of the clarifications bending the contract so much that a result adhering to the literal definitions of the original contract could -- in fact -- lead to an opposite expiry conclusion.

Once more, the original contract rules:
"This contract will settle (expire) at 100 ($10.00) if a US federal government run health plan (a public option) is approved in the United States before midnight ET on the date specified in the contract.
...
This contract covers only the creation of a government run health insurance plan that is an alternative to private health insurance. It does not cover existing health insurance programs such as Medicare or Medicaid, or any changes made to these programs or the cover they provide."

The clarifications since then have done nothing but muddy this contract. A bill such as that proposed by Sen. Carper with a public option and an opt-out clause clearly fits both the spirit and letter of the original contract rules.

Would an Intrade employee please describe how I am wrong?

Correction:

The opt-in proposal is Senator Carper's. The opt-out proposal is Senator Schumer's.

Any opt out plan is a national plan. When it passes on whatever date, states will have to opt out. When it passes it IS a national plan. If it were an opt in plan, that would be a different story. It's 100% certain that when the legislation passes it will include all states in it. A state couldn't opt out until it was passed.

midwest wrote:

Any opt out plan is a national plan. When it passes on whatever date, states will have to opt out. When it passes it IS a national plan. If it were an opt in plan, that would be a different story. It's 100% certain that when the legislation passes it will include all states in it. A state couldn't opt out until it was passed.

Just repeat that enough times to yourself and it will be true.

If a system is established that allows states to opt-in or opt-out of a government run health care plan the contract will not be expired at 100. (added 09/10/09).

You want contract? Good price you buy 5 dollah!

Man, this is bullshit.

I bought this and just now saw this extra added bit about how an opt-out isn't technically a public option??

The entire country and the entire media will consider an opt-out public option still a "public option". As the other user said, an opt-out is effectively a 50 state plan only until/unless a state backs out. Hypothetically, no state could back out, and it would be effectively a complete public option identical to one that could expire at 100.

YellowMan is COMPLETELY right. The clarification they made ran counter to the original contract definition. An opt out IS STILL a government run health insurance option.

Ugh, atleast I only bought this shit at 20 so I won't lose that much selling now.

Intrade made the wrong decision here, and I am sure many users will be extremely pissed at them when the opt-out passes and they find out they lost this bet.

I think you're right that "users will be pissed" about how subsequent contract revisions contradict the original contract wording. Intrade should be worried about that.

But more importantly, think what this does to kill the pundit/media buzz about Intrade. This guy's blog touches on that towards the end:
http://jointstock.wordpress.com/2009/10/24/intrade-a-bad-bet/

I think he's right. A big part of Intrade's growth has been driven by elite pundit excitement about how a prediction market could be better at predicting the world than entrenched observers. But what happens to the guy sitting on the fence, wondering whether to go through the hassle of mailing a check to Ireland, when he sees the contradiction of Reid announcing the public option in the senate bill, and the public option price collapsing to below 10 on Intrade? It's enough to scare off marginal market participants.

Can someone please explain why this contract has dropped to 8.1 even though most commentators are now suggesting that a bill with some kind of public option will be passed before the end of this year?

Perhaps Intrade will clarify whether an opt-out public option still qualifies?

WonkoChan wrote:

Can someone please explain why this contract has dropped to 8.1 even though most commentators are now suggesting that a bill with some kind of public option will be passed before the end of this year?

Perhaps Intrade will clarify whether an opt-out public option still qualifies?

They already did [read the posts right above this]. Intrade specifically added the following clarification to the contract

intrade wrote:

If a system is established that allows states to opt-in or opt-out of a government run health care plan the contract will not be expired at 100. (added 09/10/09).

I think its BS, but that's the rule so i'd get out of this contract ASAP, because it is pretty much agreed that a 50 state public option will not pass.

Dear Mikev3, I have just taken your advice and closed out my contracts at 8.0. I have worn a loss from an average buy in of 21. I can afford it but Intrade has left a very bad taste in my mouth from this one.

This is apparently not the first time Intrade has royally screwed the pooch with some arcane clause hidden in the contract.

http://en.wikipedia.org/wiki/Intrade#Disputes

"In July, 2006, Tradesports conceded [7] that one of these contracts was problematic. The contract offered traders to speculate on whether North Korea would, by July 31, 2006, successfully fire ballistic missiles that would land outside its airspace. This appeared to take place on July 5, 2006: the North Korean government claimed the test was successful, and it was widely reported by world media. Some traders had argued that the event did in fact occur, but Tradesports disputed this position, noting that while many government sources had confirmed the action, the US Department of Defense had not, which was the condition noted in the contract. Traders considered this a disingenuous response, noting that Tradesports had chosen a US military source which might well be biased to refuse any comment as a matter of policy alone."

Look, the people who bet on the public option without reading the contract have no one to blame but themselves. I read every contract before I trade it. The only people that are blameless are those who owned the public option contracts and the contract was changed after they had bought the contract.

Arcsol wrote:

Look, the people who bet on the public option without reading the contract have no one to blame but themselves. I read every contract before I trade it. The only people that are blameless are those who owned the public option contracts and the contract was changed after they had bought the contract.

I agree, I should have read the contract, it is my fault.

That said, Intrade clearly made the wrong decision with their clarification.

mikev3 wrote:

Arcsol wrote:

Look, the people who bet on the public option without reading the contract have no one to blame but themselves. I read every contract before I trade it. The only people that are blameless are those who owned the public option contracts and the contract was changed after they had bought the contract.

I agree, I should have read the contract, it is my fault.

That said, Intrade clearly made the wrong decision with their clarification.

I didn't like the clarification either. I was puzzled when I saw it and it made me stay even further away from the contract.

It's too bad they made a bad decision, but this is one of the bigger risks of prediction markets. No matter how good they get at contract wording, there will always be border cases that could go either way, unintuitive outcomes, and bald mistakes.

I believe some sort of clarification was required in order to excluding a health care for a single small region (eg, creating a public health care option for Washington DC residents exclusively). But I see no reason an "opt-out" plan could have been viewed as this sort of thing.

If it really was a tough borderline case (in this case, it should have been), they should have put this up for comment rather than just make a unilateral decision. Sure, a lot of people would put forth arguments that favor their stake and there'd be a lot of flaming. So what? Intrade would be looking for the best arguments for each side and this an effective way to get them. Plus, it'd warn everyone that there was a source of uncertainty in the market and to watch their fingers and toes.