Colorado Governor Jared Polis signed a public health care option on Wednesday, making it the third state in the US to approve the creation of state health insurance to be sold alongside commercial coverage on the Affordable Care Act insurance marketplaces .
More than a decade ago, a federal public option was removed from the ACA, largely due to objections from the centrist Senate Democrats. Now it's experiencing a kind of revival. President Joe Biden campaigned for a public option in 2020, and while the chances of his proposal (or something similar) being passed at the federal level have diminished, Democrats in Congress are looking for input on it, like a federal public option should look like.
But some states are not waiting for Congress to act. Your public options may be more limited than a possible federal version, but they are still valuable experiments that will test the concept in the real world.
Washington State first approved its public option in 2019 and made it available to consumers for registration in 2020. The state now has a year of experience setting up the Cascade Care program and is already starting to tinker with the guideline. It also offers classes for Colorado and Nevada (the other state that is a public option this year, a week before Colorado).
As these states finalized their plans, one thing became clear: the potential value of a public option is to contain healthcare costs by keeping rates lower than private insurance plans. However, it remains to be seen whether a public option can expand health insurance to more people.
Already more than half of the uninsured in the US are eligible for either Medicaid membership or ACA subsidies for private coverage. Surveys have shown that price concerns often prevent them from signing up. So if these public options can help contain rising healthcare costs, they can potentially impact coverage as well. But that's an open question at this point.
"The jury is not yet sure if the public option will increase enrollment," said Sabrina Corlette, co-director of the Center on Health Insurance Reforms at the McCourt School of Public Policy at Georgetown University.
"The common theme of these three bills is that they seek to lower health care costs for consumers by combating provider prices," she said of the public options in Washington, Colorado and Nevada. "Time will tell whether you will expand coverage by lowering your premiums."
With three public, state-level options now in the wild, we get a clearer idea of the characteristics they share and how they differ. Even if nothing happens in Congress, the coming years will be a natural experiment in how to run a public option.
What the public options in Washington, Colorado, and Nevada have in common
Neither state offers a "public" option like the one in Congress in 2009, where the government creates and manages its own health insurance plan.
"None of them are real public options in that sense," said Katie Keith, who writes on health insurance reform and has consulted with states on developing public option laws.
Instead, she compares them to public-private partnerships. States contract with private companies to create new insurance options that are monitored, if not managed, by the government. States would face practical challenges in choosing a “real” public option – namely, building the financial reserves they would need to settle claims – so they are taking a different approach where private insurance companies rule out the public option. run the government.
This is not unprecedented: Medicare and Medicaid already rely on private companies to manage benefits for some of their enrollments.
The plans are sold alongside ACA-compliant private insurance on the ACA marketplaces. Only people who are eligible for ACA coverage through the individual and small group market can register; These plans are not the kind of public option that some Democrats considered during the 2020 presidential campaign that would have allowed people with large group coverage as well.
All of these states are also trying to save money for both government and consumers. Nevada, for example, has set very specific goals: the public option should have short-term premiums that are 5 percent lower than a benchmark plan; In the longer term, the goal is to reduce premiums by 15 percent below comparable private tariffs on the market. Similarly, Colorado will require public option plans to reduce premiums by 15 percent over three years.
It is important that all three states pursue waivers by the federal government. (Washington had originally not done this because the Trump administration was categorically against state-level public options, but new laws require the state to do so.) These waivers would allow states to keep any savings for the federal government by lowering premiums ( and thus ACA subsidies). That money can then be used to provide more financial aid to help meet people's premiums or otherwise reduce healthcare costs.
However, these states are pursuing different strategies to achieve their savings and to ensure that doctors and hospitals actually accept the public option so that patients can get the medical care they need.
How these three public options differ at the state level
At first glance, these state public options look very similar. But in the details they have several important differences.
How much health care providers to pay is the number one question for any health insurance plan – these prices determine the premiums that customers will be billed – and these states have different approaches to their calculations.
Washington has capped provider payments to 160 percent of Medicare payment rates. Colorado has dictated that provider prices cannot be lower than 155 percent from Medicare; However, if the insurers fail to achieve a premium reduction of 15 percent, the state insurance commissioner is authorized to order lower tariffs. Nevada has said its public option can pay providers no less than Medicare, but otherwise it leaves the plan flexibility to meet its own premium reduction goals.
One challenge in trying to set lower carrier rates is that doctors and hospitals may simply not accept the public option plan. That was Washington's experience in the first year: some hospitals refused to cooperate with the public plan, and since an adequate network of providers is impossible without a hospital, the plan was only available in 19 of the state's 39 districts.
Washington is trying to correct this problem through recently signed laws that, among other things, require hospitals in large systems to participate in at least one public option plan. Nevada and Colorado, having seen Washington's network adequacy issues, set their own eligibility requirements for providers from the start.
"Nevada and Colorado have clearly inherited one side of Washington's experience," said Corlette of Georgetown.
If a provider in Nevada accepts the state health insurance plan, Employee Compensation, or Medicaid, they must accept the public option. Meanwhile, Colorado hospitals must accept the public option – with the risk that the state could step in and mandate lower reimbursement rates if costs don't come down fast enough.
For benefits, Colorado and Washington set up a so-called standardized benefit plan through their public options. With the standardized services, some services (e.g. general practitioner visits and prescription generics) are provided either free of charge or for a small deductible, even if the policyholder has not yet paid his deductible. Other popular medical services have well-defined cost-sharing obligations for patients, designed to make it easier for customers to know what to pay for out-of-pocket health care when they sign up for this plan.
Nevada, on the other hand, did not say how the services should be structured as part of its public option, nor what the cost-sharing obligations for patients should look like.
If you look under the hood, there are important differences in how these public options work. But they all strive for the same goals: lower healthcare costs and hopefully more coverage. The test now is whether they can achieve their goals.
"It will be interesting to see if additional intervention is required," said Keith, "or if this can be successful."