You hit the nail on the head and thats basically the entire point of this first bill. The bill is health INSURANCE reform. The first part explains how stricter will be made and how those standards will be applied. But you can only do so much without destroying an entire industry...which is not the goal. The goal is to make them clean up their act.
The second part is about the alternative plan, because studies show that even after stricter standards are applied, people still wont be able to afford health coverage. An alternative plan will also provide minimal competition. If the private insurance companies want to keep profitting they better start being able to offer better plans than the government run plan. It makes perfect sense and its a perfectly logical and necessary step.