The employer public option: The future of employer-sponsored health insurance?

With the cost of employer-sponsored health insurance increasing, Congress should consider creating a federal public option for employers, the progressive Center for American Progress said, in new reports.

“If designed thoughtfully to spur cost and quality competition, creating a federal public option could improve affordability for employers regardless of whether they joined the new option or retained private coverage,” the Center said, in “Federal Solutions to Address Rising Costs of Employer-Sponsored Insurance [ESI],” one of two reports on the topic released by the think tank. “The savings employers accrue from participating in a public option would reach employees through lower premiums and cost sharing.”

The Center said that many business leaders are rightly worried about the future of ESI and that the federal government has an important role to play in lowering the cost of insurance and making it more affordable for employees.

“As health care costs continue to rise, employers are calling on the federal government to deliver solutions,” said Andrea Ducas, CAP vice president of health policy. “Congress has the opportunity to take several actions to make ESI a more affordable, comprehensive coverage option for both employers and employees for the years to come.”

For employers, a new public option would represent another health insurance plan, run by the federal government, for employees seeking basic, affordable coverage. Small employers that previously didn’t offer coverage, or only offered coverage with multiple barriers to access, would be able to include it in a benefits package, alongside the existing private health insurance plans, without adding to their cost structure.

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The Center said that the federal government can attack insurance and health care costs in several ways, including by:

• Improving transparency in health care pricing by developing a national all-payer claims database (APCD). As of 2022, 18 states had operational APCDs, with another eight developing new ones. “The strength of APCDs is that they provide access to a nearly complete picture of the commercial insurance landscape in a state,” the Center said.
• Using antitrust enforcement tools to bring greater scrutiny to industry consolidation and anti-competitive practices. To accomplish that goal, antitrust agencies must be given the resources and authority to slow consolidation, the Center said.
• Restricting the growth of High Deductible Health Plans, which would discourage employers from offering them. Insurance products with less financial exposure for enrollees protect employees and their families, according to the Center.
• Expanding the role of state insurance regulation through ERISA. That would help protect consumers from high costs, according to the Center.
• Providing incentives for insurer participation in the Small Business Health Options Program (SHOP). If more small businesses were able to purchase ESI through SHOP exchanges, many uninsured employees could gain access to the affordable ESI, the Center said.
• Lowering excessive drug prices through price negotiation and inflation rebates in the commercial market, thereby reducing employee cost-sharing.
• Bringing greater transparency to the practices of Pharmacy Benefit Managers by ensuring that they do not harm competition and requiring that negotiated rebates reach consumers.
• Addressing the exploitation of the patent system by drug manufacturers. The Center said that drug manufacturers frequently manipulate the patent system to extend the exclusivity period for brand-name drugs for as long as possible. “Reforming the patent system and regulating manufacturer tactics that prevent more affordable drug options from coming to market would lower consumer costs through reduced premiums and cost sharing,” according to the Center.