Public Option Health Plans Continue to Progress at State Levels

Efforts to create a federal public option health plan may have stalled, but public options on the state level are slowly emerging, according to a Manatt Health mid-year update.

While President Biden’s health reform supported a federal public health insurance option through the Affordable Care Act (ACA) marketplace, it has hit legislative obstacles. Instead, the Biden administration has focused on expanding and eventually making permanent the ACA subsidies under the American Rescue Plan Act.

Eighteen million individuals have been able to access health insurance since the Affordable Care Act was passed in 2010. But uninsurance remains prevalent with more than 26 million Americans uninsured in 2019, according to the report.

An affordable public option has the potential to reduce uninsurance levels. While federal-level action has been stagnant, several states have implemented public options in 2021.

Washington was the first state to introduce a public option health plan, the report reviewed. The state passed the initiative in 2019, but it did not go into effect until 2021. The public option health plans are standardized plans offering bronze, silver, and gold levels that are offered in the state health insurance marketplace.

Standardized plans can require higher premiums but the deductibles are usually significantly lower than non-standard plans on the same level. Standardized public option health plans also offer more services and feature reduced cost-sharing.

Of the 222,000 members who enrolled in a health plan during Washington’s 2021 open enrollment period, 35,000 people chose a standardized health plan, with 1,900 of them signing up for a public option health plan. Public option health plans were available in 19 out of the 39 counties in Washington.

The state introduced new laws to solidify the public option plans and increase the number of enrollees. The legislation attaches subsidies to standardized silver or gold plans for certain individuals. It also requires certain hospitals to offer services through a public option health plan and gives state regulators the power to enforce this.

Nevada has also implemented a public option strategy for its residents. Under this law, there will be a bidding process to choose the payers that will offer the public option health plans through the marketplace. Medicaid managed care organizations must participate in the bidding process.

“Premiums for the public option plan must be at least five percent lower than the benchmark premium in each zip code and cannot increase by more than the Medicare Economic Index each year,” the report stated.

Colorado introduced legislation that will offer a public option starting in 2023, according to the Manatt report. The law requires payers to offer a standardized plan, reducing the premiums each year until 2026 when the premium rate should stay equal to or less than medical inflation. However, policymakers paused the proposal due to the pandemic.

The state of Oregon has passed legislation requiring the Oregon Health Authority to create a public option implementation plan by January 2022. While there is no public option currently available, this law ensures the state will eventually introduce public health plans for individuals, families, and small employers.

State-level public health plan options can potentially benefit residents in a way that a federal public option could not. By implementing this strategy at the state level, plans can be designed to meet different state policies, address specific populations in the state that may need support, and improve health equity.

States can use the models that would best suit their residents, such as state-contracted public-private partnerships or state-sponsored health insurance provided by a third-party.

Going forward, more states are expected to take steps toward creating public option health plans. States may also seek to partner with the federal administration for approval of Section 1332 waivers, the report predicted.

Although the Biden administration’s plan to expand ACA subsidies could solidify low premiums, introducing a public health plan option through the ACA marketplace would reduce federal spending increases as well as expand coverage to more individuals, an Urban Institute report showed.