President Joe Biden has yet to live up to his campaign promise to create a national public health insurance system, but three states have moved forward with their own plans.
Colorado and Nevada this year adopted government options plans – government health insurance plans set to launch in 2023 and 2026, respectively. They join the state of Washington, which enacted its law in 2019 and launched its public version in January.
Supporters hope a more affordable alternative will attract residents without health insurance.
“We have seen that when people can afford health insurance, they are insured and have access to health care that they would not otherwise have access to,” said Nevada Senate Majority Leader Nicole Cannizzaro, a Democrat who sponsored her state bill.
State Republican Senator Joe Hardy argued that supporters have not proven they can develop a financially viable public option. Hardy said he doesn’t expect this to change in the four years that the law gives Nevada to develop a plan.
“This is a classic example of ‘Knock knock, who’s there? I’m from the government and I want to help you, ”said Hardy. “It will just be another government program that takes money away from the bureaucracy.”
Whether Cannizzaro’s claim will be true – people will choose the public option or that it will be cheaper than commercial plans – is still unknown.
Early results from the Washington State experiment are disappointing. In many parts of the state, government option plan premiums are worth more than comparable commercial plan premiums.
Many state hospitals have declined to participate in the public option, prompting lawmakers to pass more laws this year to force participation if there are insufficient health insurance options in a given geographic area. And customer support isn’t great either. In its first year of operation, the public health insurance exchange sold only 1,443 government options plans, which is less than 1% of all exchange policies.
Michael Marchand, director of marketing for the Washington Health Benefit Exchange, the state health insurance market, said it was premature to judge the program by its first year.
He noted that in the early years of Obamacare, the premiums for many of the commercial plans were high. In the end, as insurers got better at understanding markets, prices fell, he said.
“I knew that one year would not necessarily tell the whole story of how it would end,” he said. “We’ll have to wait a few years.”
Many commercial insurers and health care providers say they may wishful thinking and question the viability of the Colorado and Nevada plans. They also warn that community opportunities based on lower payments to hospitals and doctors could ultimately limit access to health care.
The health insurance industry has lobbied for government option plans in three states.
“The concern is that with government-agreed public interest rates, these plans will become so popular and cheaper that they will kick the private market out of business and push us towards a single payer system in the long run, over the next 10-15 years, ”said Marcy Buckner, senior vice president of government affairs at the National Association of Health Insurers.
The group argues that focus should instead be on strengthening the Affordable Care Act, which has reduced the number of Americans without health insurance since its enactment in 2014.
State legislators continued to consider government option plans to further increase health insurance coverage. Lawmakers in Connecticut, Maine, New Jersey, New Mexico and Oregon have either filed bills or conducted research on government option plans over the past three years. National polls show strong support for public choice.
Insure more people
Despite progress made under the Affordable Care Act, an annual survey conducted by the US Census Bureau found that 9.2% of the population, nearly 30 million Americans, were without health insurance in 2019.
Colorado member Dylan Roberts has two rural counties that have nearly double the national uninsured rate. Over the years, he says, only one operator has sold plans in each of his constituencies, and insurance premiums are too expensive for many of his voters.
“There was no competition in my region and the rates continued to rise because nothing could hold them back,” said Roberts, a Democrat.
He began pushing for a public option shortly after he won his seat in 2018.
By the strictest definition, a sovereign option plan is a plan that the government creates and administers to compete with commercial plans.
Neither the Washington State plan, nor the plans adopted by Colorado or Nevada, exactly fit this definition. Instead, they all involve public-private partnerships in which commercial carriers manage health plans that are governed by government regulations.
In this August 20, 2019 photo, Linda Whaley holds Sarah’s beagle so that Harold Christiansen of Callender, Iowa, can pet her while visiting the UnityPoint Health-Trinity Regional Medical Center in Fort Dodge, Iowa.
Each state’s government stock plan has its own drawbacks.
Colorado and Nevada laws set limits on insurance premiums. For example, in Nevada, premiums will initially be set 5% lower than a “benchmark” commercial plan traded on an exchange in the same region. After all, the law requires the public option premium to be 15% lower than the benchmark.
Colorado requires operators offering government options plans in 2023 to set premiums 6% lower than plans they sold in 2021. By 2025, they should be 18% lower.
There are no mandatory premium levels in Washington State, and premiums on government option plans in many parts of the state are higher in the first year than comparable commercial plans. In many cases, patient costs can be lower in government option plans due to lower co-payments and deductibles, Marchand said.
Lower compensation to suppliers
To achieve savings, all government-option plans will pay suppliers less than commercial insurers. The State of Washington has set a provider reimbursement rate of 160% of what Medicare pays. (According to the Kaiser Family Foundation, private insurers pay nearly double what Medicare does for hospital services.)
Nevada law sets Medicare payment rates as the minimum reimbursement level, and the actual rate is negotiated. Colorado law dictates that the reimbursement rate must be at least 155% of the Medicare rate, but if insurers fail to comply with the premium cuts in state option plans, the state insurance commissioner can step in to set the reimbursement rate.
These lower reimbursement rates apply to hospitals and medical organizations.
Chalen Whitaker, senior vice president of government for the Washington Hospital Association, said hospital finances are dependent on higher commercial insurance reimbursement rates to offset low Medicare and Medicaid rates. The public option, she said, if consumers in Washington turned to it, could weaken the financial strength of hospitals.
“When this equation gets unbalanced, we can’t deal with it and have to think about closing hospitals, merging or cutting our services,” she said.
States failed to roll out health insurance exchanges
While the Colorado Society of Medicine, which represents doctors, was neutral about the bill that eventually passed, its CEO said the burden of keeping the plan running was on healthcare providers.
“What this bill doesn’t address at all is the total cost of treatment and the underlying factors that keep everything in healthcare so costly, like inefficiency, monopoly, pharmaceuticals and a million other things,” said Brian Campbell, CEO of the Colorado Medical Society.
Colorado Senator Jim Smallwood, a Republican, described his state’s public election as “an arbitrary tariff cut bill for doctors and hospitals. In essence, it imposes the will of the insurance commissioner on setting prices for doctors and hospitals. ”
Healthcare providers in Colorado have given up a clause that would force them to participate in public choice. But in Nevada, one of the conditions of the law for participation in the state Medicaid program and in the health insurance plan for government employees is that doctors and hospitals must treat the participants in the state option.
“Doing something like this would be an incredibly heavy administrative burden,” said Heather Korbulich, executive director of the Silver State Health Insurance Exchange.
Nina Ovcharenko Schaefer, senior health researcher at the conservative think tank Heritage Foundation, said the state’s government options laws are a tacit acknowledgment of the weakness of the Affordable Care Act, which established the sharing of health benefits and expanded Medicaid. In her opinion, the actions of the state could ultimately conflict with the plans of the Democrats in Congress, including the possibility of a federal public choice plan.
“If Washington does one thing and states do another, in the long run they don’t fit together,” she said. “What is Washington [state] what are you going to do if Congress makes its own public choice? “
She and other critics also noted that Biden’s American bailout plan temporarily increased federal tax credits to help consumers buy policies from health insurance exchanges. Democrats hope to make this additional funding permanent. If so, Schaefer asks, why would states need a public option?
One reason, Nevada-based Cannizzaro said, is that because Nevada residents will use fewer federal tax breaks to help poorer Americans acquire commercial plans, the state may donate some of the federal money as a reward. Nevada could use this money for other health-related purposes, such as helping out-of-legal immigrants gain access to tax breaks.
“We can’t sit and wait here in Nevada for a few more years,” she said. “We have an uninsured population, and we don’t have time to sit and wait to see if the federal government is going to do something longer term.”