State lawmakers: Think big when proposing public option plans
A new paper suggests that states should “go big or go home” when it comes to implementing public option programs.
Harvard researchers have a new paper that suggests that states should “go big or go home” when it comes to considering public option insurance programs.
The paper, published in the Harvard Journal of Legislation, examines state public option programs from recent years, when states such as Nevada, Colorado and Washington have attempted to implement public option programs. Such programs provide a publicly financed health insurance program that supporters say can be less expensive for consumers while providing more competition with other plans.
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The report, entitled, “Are State Public Option Health Plans Worth It?” examined the pluses and minuses of such plans, which states have been experimenting with since the Affordable Care Act (ACA) was implemented in 2010.
Three basic models
The article noted that there are three basic models of public option health care plans: Medicaid Buy-In Public Options; Marketplace-Based Public Options (MBPOs); and Comprehensive Public Options. “Though each model serves different policy goals and varies in scope, the defining aim of all public option plans is to improve access to affordable health coverage by applying public payment rates to the private insurance market,” they wrote.
The researchers said they were trying to quantify whether such plans were “worth it” and legally viable for states.
The report also noted that state efforts were constrained to some degree by federal regulation, both in the ACA and in other wide-ranging regulatory acts such as The Employee Retirement and Income Security Act of 1974 (ERISA). “States also have a comparative disadvantage in financing their public option plans, as they must balance their budgets and have limited ability to raise new taxes. In sum, state public option plans have more legal and fiscal constraints than a federal version,” the report said.
The Medicaid Buy-In option was given as an example where state limitations and federal regulations make the option less attractive in some ways. By adopting relatively low Medicaid reimbursement rates, such programs may have lower provider participation. Other regulations could make establishing this kind of plan complicated for states.
The second choice, MBPOs, would provide more competition in the ACA marketplaces, where private plans are offered with subsidies for most enrollees. The researchers noted that in most counties in the U.S., ACA Marketplaces currently offer only one or two insurer options.
The downside of a MBPO is that it could drive current private insurers out of the market, the paper said. “The sweet spot between driving cost savings and maintaining a competitive public-private Marketplace may be as difficult to find as the proverbial needle in the haystack,” the authors write. “In sum, the state must decide how willing it is to disrupt the existing market in order to achieve its goals of increased access and affordability.”
“Bigger is vetter”—the comprehensive public option
The researchers conclude that the third option, a comprehensive approach to a public health insurance offering, is probably the best overall choice because it can deliver the best results.
For one thing, the report said, funding is more robust in the third option, since comprehensive plans can draw on individual taxes, payroll taxes, and premiums as sources of funding. The plans also have more flexibility in payment rates for providers, allowing them to compete more closely with private plans.
In conclusion, the authors write that the plan that works best for any individual state may depend on what the state wants out of a public option plan. Medicaid buy-ins may work best for states whose goal is to provide access to difficult-to-cover, lower-income populations. MBPOs may offer more flexibility in coverage but tend to set lower reimbursement rates and are less popular with providers as a result.
The comprehensive approach, the report said, is best for broad expansion of access, administrative simplification, and improves affordability while controlling spending. They may disrupt the market, but they are large enough to require other stakeholders to play ball.
“Though all three [public option] models are viable, the degree of legal difficulty is not much greater for the broadest plans than the narrowest ones, while effectiveness increases with the plan’s scope,” the report said. “Thus, for state public option plans, bigger is better.”
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