With the chances of the United States adopting a single-payer “Medicare for All” scheme dwindling, healthcare reform proponents turned to a government-designed insurance plan that could compete with commercial insurance plans provided on healthcare exchanges. The premise behind this “public option” is that it will eventually increase healthcare access by providing consumers with a lower-cost option.
However, despite the support of Vice President Joe Biden and President Barack Obama, the public option concept has failed to gain traction in Congress due to political resistance.
As a result, other states have taken up the cause and developed their public option strategies. They, too, are up against tremendous opposition from the healthcare establishment, which is opposing pressure to decrease back-end expenses so that consumers can pay less.
Washington state has learned a crucial lesson in its second year of offering the nation’s first public choice health insurance plan: You’ll have to push hospitals to participate if you want them to.
In Washington, the public option is more of a public-private collaboration: The state created the plan, but it is only available through private insurance firms. Anyone buying their policy on the state’s health insurance exchange can enroll in a public option plan. Depending on their income, they may be eligible for considerable federal subsidies to help defray the cost.
However, two years later, the plans are only accessible in twenty-five of the state’s thirty-nine counties, membership numbers remain low, and state officials blame hospitals.
“The networks were difficult to put up because the hospitals wouldn’t play,” said Eileen Cody, a Washington state representative who introduced the public option bill in 2019. “They’re a significant contributor to the situation.”
According to officials with the Washington State Hospital Association and NPR, more hospitals willingly engage in public option programs than not. However, they pointed out that the public option relies on hospitals receiving lower payments to manage expenses, and compensation is tied to Medicare rates, which do not cover hospitals’ costs of providing treatment.
“If customers choose a public option plan over private insurance, it might pose financial issues in the long run, especially for small, rural providers with low margins,” said Chelene Whiteaker, the hospital group’s senior vice president of government affairs.
Last year, Washington state legislators decided to require hospitals to contract with a public option plan if one was not available in each county by 2022. The mandate is set to take effect in 2023.
Other states considering a public option are taking note of Washington’s difficulties. Colorado and Nevada, which will implement public option programs in 2023 and 2026, respectively, have already built-in mechanisms to compel hospitals to participate. Connecticut, Oregon, New Jersey, and New Mexico, among other states contemplating a public option, are likely to follow suit.
“One thing the states have learned is that you can’t make it optional for hospitals to join,” said Erin Fuse Brown, director of Georgia State College of Law’s Center for Law, Health, and Society. “Otherwise, the public option will have little chance of succeeding. It will never be able to construct a large enough network.”
The public option in Washington was created to save customers money by decreasing hospital and doctor costs, restricting aggregate payments at 160 percent of what Medicare would pay for those services. On the other hand, health insurance pays providers on average 174 percent of Medicare rates.
Anyone can purchase a public option plan available in the same gold, silver, and bronze categories as private plans on the health insurance market. According to supporters, the cap would cut premiums for public option plans by 5% to 10% compared to standard market plans. However, public option premiums were 11 percent more on average than the lowest silver plan premium in each county on the marketplace in 2021. A silver, public option plan had the lowest price in nine counties. Silver plans, on average, cover around 70% of healthcare costs.
In 2021, only 1% of consumers purchasing plans on the exchange chose public option plans. Premiums for the public option in 2022 are expected to be around 5% cheaper than those in 2021. The state is waiting to see how many of the people who signed up complete the process by paying their premiums before releasing the enrollment numbers for this year.
“We know premiums affect enrollment decisions,” said Liz Hagan, director of policy solutions for United States of Care, a group that fights for better healthcare access. “People rarely look at anything else than the premium. They rarely consider out-of-pocket expenses.”
However, officials at the exchange claim that knowledgeable consumers discover that public option plans are less expensive in the long run. They offer lower deductibles and provide more services not subject to the deductible compared to typical exchange plans.
“Premium is still king,” said Michael Marchand, the Washington Health Benefit Exchange’s chief marketing officer. “However, there are a lot of folks who have gotten a lot better about how they price things out.”
Marchand also stated that gaining acceptance in the marketplace for a new product such as the public option plan might take several years. Insurance firms may have overpriced their policies in the first year since they did not know what to expect. They have reduced premiums slightly now that they have been in business for a year.