With prospects for the U.S. adopting a single-payer “Medicare for All” program dim, proponents of health care reform have instead turned to a government-designed insurance plan that could compete with private insurance plans sold on health care exchanges. The idea behind this “public option” is that it could ultimately expand access to health care by making a plan available to consumers at a lower cost.
But the public option plan, while backed by Presidents Biden and Barack Obama, also came to naught due to political opposition in Congress.
Thus, some states have taken up the torch and are creating their own public option plans. But they, too, face formidable opposition from the health care establishment, which is resisting pressure to cut downstream costs so consumers can pay less.
Washington state, in its second year of offering the nation’s first public health insurance plan, has learned an important lesson: If you want hospitals to participate, you’ll probably have to force them.
Washington’s public option is more of a public-private partnership: the plan was designed by the state but is offered by private insurance companies. Anyone who buys their own policy in the state health insurance market can purchase a public option plan and, depending on their income, can receive significant subsidies from the federal government to reduce their cost.
But two years later, plans are only available in 25 of the state’s 39 counties, enrollment numbers have been disappointing, and state leaders are blaming hospitals.
“Plans struggled to get networks in place because hospitals wouldn’t play,” said state Rep. Eileen Cody, the Washington lawmaker who introduced the public option bill in 2019. “They are a big part of the problem.”
Washington State Hospital Association officials said more hospitals are voluntarily participating in public option plans. But, they noted, the public option relies on reducing payments to hospitals to control costs and ties reimbursement to Medicare rates, which do not cover hospitals’ costs of providing care.
“If patients choose to enroll in a public option plan rather than private insurance, it could create financial challenges over time, especially for small, rural providers operating on thin margins,” Chelene said. Whiteaker, senior vice president of government affairs for the hospital group.
Last year, Washington state lawmakers voted to require hospitals to contract with a public option plan if public option plans weren’t available in every county by 2022. That mandate will come into force in 2023.
Other states are monitoring Washington’s public option struggles
Other states considering a public option are learning from Washington’s challenges. Colorado and Nevada, which are implementing public option plans in 2023 and 2026, respectively, have already built in ways to force hospitals to participate. And other states considering a public option — including Connecticut, Oregon, New Jersey and New Mexico — are likely to follow suit.
“One thing that states have learned is that you can’t make hospital participation optional,” said Erin Fuse Brown, director of the Center for Law, Health & Society at the Georgia State College of Law. “Otherwise, there’s just no way the public option will have a chance. It’ll never build a sufficient network.”
Washington’s public option was designed to save consumers money primarily by reducing what hospitals and doctors are paid, capping overall payments at 160% of what Medicare would pay for those services. In comparison, health plans paid providers an average of 174% of Medicare rates.
Public option plans are available to everyone and are in the same gold, silver, and bronze tiers as private plans on the health insurance exchange. Proponents estimated that the cap would result in public option plans having premiums 5% to 10% lower than traditional plans on the stock exchange. But public option premiums were, on average, 11% higher than the lowest silver plan premium available in every county in the market in 2021, and a silver public option plan had the lowest premium in only nine counties. Silver plans cover, on average, around 70% of healthcare costs.
Only 1% of people buying plans on the stock exchange chose public option plans in 2021. Public option premiums for 2022 were about 5% lower than public option premiums in 2021. The figures from registration this year have not been finalized – the state is waiting to see how many people who have registered complete the process by paying their premiums.
“We know premiums are what drive enrollment decision-making,” said Liz Hagan, director of policy solutions for United States of Care, a nonprofit that advocates for improved health care. access to health care. “People often don’t look at anything other than the premium. They rarely look at out-of-pocket expenses.”
But stock exchange officials say savvy consumers find public option plans cheaper in the long run. Compared to traditional exchange plans, they have lower deductibles and provide more non-deductible services.
“Premium is always king,” said Michael Marchand, chief marketing officer for the Washington Health Benefit Exchange. “But we have a lot of people who have gotten a lot smarter about how they price something.”
Marchand also said it might take a few years for a new product like the public option plan to gain traction in the market. Insurance companies may have priced their plans a bit high the first year, not knowing what to expect. Now, with a year under their belt, they have reduced the premiums somewhat.
Limited choices to reduce costs
Washington’s stumble reflects the difficulty of cutting health care costs while working within the current system. Lawmakers originally wanted to cut payment rates to hospitals and other providers much further, but raised the cap on the legislation so hospitals wouldn’t oppose the bill. Now, it’s unclear whether the payment cap is low enough to reduce premiums.
“That’s kind of the big trade-off,” said Aditi Sen, a health economist at the Johns Hopkins Bloomberg School of Public Health. “You’re trying to reduce premiums enough to get people to sign up, but not so much that providers don’t participate.”
This will be a challenge for any state or federal public option plan. There are only a number of ways to reduce premiums. Hospitals, doctors and other healthcare professionals have strongly pushed back on any cuts to their payment rates, while insurance plans balk at plans that could eat away at their profits.
Plans can reduce the size of their provider network to save money, but consumers don’t like plans that limit the number of doctors they can see. Public option plans could build on existing public health programs, like Medicare and Medicaid, which already pay lower rates than commercial insurance, but government-run insurance plans have overtones. negative for many consumers.
Sen and his colleagues found that in 2021, Washington counties with public option plans were mostly in areas where hospital and physician payment rates were lower than other parts of the state. This may have helped insurers grow networks while staying under the 160% provider payment cap.
Five of the 12 private insurers that sell plans on the exchange offer public option plans.
Insurance companies that previously offered plans in Washington were able to cobble together networks based on existing contracts with hospitals and physician groups. But two carriers new to the Washington Stock Exchange had to start from scratch and negotiate prices with providers for their public option plans. Some of the insurance companies tried to offer public option plans in other counties but could not persuade hospitals, especially those in larger hospital systems, to accept their rates.
Washington saw enrollment in public option plans begin to climb during a special enrollment period launched in mid-2021 due to the COVID-19 pandemic. The American Rescue Plan Act also provided more subsidies, which made all plans on the exchange more affordable. But those grants are set to expire at the end of the year unless Congress votes to extend them. An extension is included in the Biden administration’s Build Back Better legislation, but the legislation has stalled in Congress.
Washington lawmakers have approved other measures to make the public option more affordable. They have set aside $50 million in state grants, but officials have yet to figure out how to allocate those funds. And lawmakers have authorized the state to seek a waiver from the federal government that could allow the state to keep more of the savings from premium reductions. Right now, lower premiums also mean less subsidy from the federal government. The state can request that these savings be passed on to consumers.
Washington did not request such a waiver before implementing its public option plan, but many believe the Biden administration may be more receptive to such a request than the Trump administration.
The state’s progress on public option plans comes amid disappointment among many progressives that Congress did not implement a federal public option under the Affordable Care Act to compete with private plans. on the stairs.
Washington state officials realize that because they were the first to implement a public option, other states will be watching them closely to see how it all plays out. “We’re not the only ones, but we’re the most advanced,” Cody said. “Other people can learn from our mistakes.”
KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism on health issues. It is an editorially independent operating program of KFF (Kaiser Family Foundation).