The Public Option for health insurance has long been advocated by some lawmakers. They suggest adding these plans to the health insurance plans available via the Affordable Care Act exchanges will help more people.
There’s only one problem: they don’t work!
When Democrats were first trying to get the Affordable Care Act through Congress in 2009 and 2010, they were forced to drop the public option idea in order to get enough votes in Congress.
They got a watered-down version of the ACA through to then President Obama’s desk, but without any kind of government-operated “public option” health insurance plan other than Medicaid, which is designed for the poor and indigent, not for the mass market.
Stymied in Washington D.C., Democrats have turned instead to state legislatures, looking to pass in the state houses what they couldn’t pass at the federal level.
So far, it’s been a tough sell: the insurance industry has strongly opposed attempts to create health insurance public options.
Just three states have attempted to pass a health insurance public option: Washington, Colorado, and Nevada.
And in all three states, the public options have failed to deliver on their advocates’ promises.
The Public Option in Washington
Washington was the first state to roll out a public option and actually make it available for consumers to sign up for it.
The Washington public option, dubbed “Cascade Select,” is really a kind of public/private partnership. Consumers who want the Washington public option still buy their insurance from a private carrier, not from the state, directly.
In Washington, Democrat policymakers attempted to generate cost savings for consumers by reducing reimbursement rates – the money they pay to doctors, hospitals, and other healthcare providers to provide health care.
In Washington, policymakers capped reimbursement rates at 160% of the official Medicare reimbursement rate for any given medical service.
The problem: few doctors and hospitals wanted public option patients. In Washington, panels of bureaucrats thought they could wave a magic wand and health care providers would just fall in line and accept these rock-bottom reimbursement rates.
In essence, the state elected to embrace bureaucratic price controls instead of market forces – with predictable results.
Hospitals and providers simply refused to take the insurance – leaving thousands of Washingtonians with cheaply-priced insurance… that they couldn’t use.
The public has not been enamored with the plans, either.
First, the cost savings weren’t there. The average Cascade Select premium in 2021 was 11% higher than the lowest silver plan premium available in each county on the marketplace. The “ silver” public option plan had the lowest premium in just nine counties, according to NPR reporting.
Enrollment numbers have been far weaker than projections. By 2021, only 1% of consumers buying coverage on the state’s health insurance exchange opted for the Cascade Select plan. And only 7,000 of the 240,000 Washingtonians who enrolled in individual plans via the state marketplace opted for Cascade Select in 2022.
And in many counties, Washington residents couldn’t buy a public option if they wanted to. Fully two years after the public option in Washington was implemented, the plan still wasn’t even available in 14 out of the state’s 39 counties.
Rural hospitals, operating on already-thin margins, had particular challenges in contracting with Cascade Select plans. If sizable numbers of people switched their coverage from a standard plan to Cascade Select, the lower reimbursement rates could force hospital closures in areas that cannot afford to lose their hospitals.
But instead of blaming themselves for relying on price controls for the success of their plan, a device with a long and unbroken track record of failure, Washington officials are blaming the doctors and hospitals for refusing to play.
And instead of paying market prices for services, or even negotiating a reasonable discount at arm’s length, Washington government officials and policymakers are turning to coercion: if care providers won’t voluntarily take below-market and money-losing reimbursement rates, the progressive’s next step is coercion.
Last year, the Washington legislature voted to force hospitals and providers to contract with a public option plan beginning in 2023, if the public option is not available in every county.
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The Public Option in Colorado
Other states are monitoring what’s happening in Washington. Colorado recently passed another version of a health insurance public option, which first became available to consumers in January of 2023.
That rollout, too, has been disappointing.
Under the plan, called the “Colorado Option,” state policymakers expect insurance carriers to reduce prices for plan participants by 5% in 2023, 5% in 2024, and another 5% in 2025.
But thus far, only one insurance company out of the eight doing business in the state’s ACA-qualified health insurance market met the cost-cutting targets expected by the plan’s advocates.
At the consumer level, the promised savings have not materialized. For most Coloradans, the Colorado Option plans are more expensive than the traditional, non-Colorado Option plans. 60 percent of Coloradans have plan choices that are less expensive than the Colorado Option.
And in areas where the Colorado Option plan was the lowest-cost plan available, the savings amounted to less than a dollar per month, according to Colorado Senator Jim Smallwood, an outspoken critic of the plan.
And enrollment, too, has been lackluster: despite massive publicity, only about 35,000 people statewide opted for the plan – approximately 25,000 through Connect for Health Colorado, the state’s health insurance marketplace, and another 10,000 via OmniSalud.
Potential customers didn’t care for the plan’s extremely narrow care networks. Like Washington’s healthcare providers, very few Colorado providers were willing to voluntarily contract with the Colorado Option.
But instead of learning the correct lesson from Washington’s challenges – that price controls have a long and consistent track record of generating shortages, want, and market failures, public option advocates are doubling down on coercion.
“One thing that the states have learned is you cannot make it optional for hospitals to participate,” said Erin Fuse Brown, the director of the Center for Law, Health & Society at Georgia State College of Law. “Otherwise, there’s just no way for the public option to have a chance. It will never build a sufficient network.”
The Colorado Department of Insurance states on its website that “The Commissioner will enforce premium reductions through the Division’s rate review and a new public hearing process”.
As a result, multiple carriers perceived that the regulatory environment was growing increasingly hostile, l – and elected to partially or completely stop writing business in Colorado, leaving thousands scrambling to find new coverage.
Carriers are fleeing the state because it’s too expensive to do business here, wrote Smallwood in a recent editorial. “The only people who suffer are Colorado patients.”
The Public Option in Nevada
Nevada is the third state experimenting with a public health insurance option.
The Nevada State Legislature passed SB420 entirely along party lines, with no Republican support.
The law requires insurers that bid to provide coverage to the state’s Medicaid population to also offer a public option plan comparable to other currently available plans, but at a 5% markdown.
Again, the Nevada plan relies on price controls: Under the law, Nevada will set ceilings for premium prices for public option plans.
The plan is still in its early stages, and not yet available to consumers. But policymakers are already abandoning their early 20% cost reduction targets as unrealistic, and reducing targets to 16%.
Opponents predict that the plan will not actually reduce costs at all, but simply shift costs around and distort the market as providers are forced to make up for losses on public option patients by raising prices elsewhere in the system.
Meanwhile, the state’s newly-elected Republican governor Joe Lombardo, who won campaigning against the Nevada public option, is unlikely to expend political capital in support of the plan.
In each case, the pattern is clear. Every public option relies on state-enforced fiat price controls to make the plan work. And in each case, the bureaucrats substituting their politicized wishful thinking for market forces fail – as economic central planning always fails.
And then in the case of Washington and Colorado (so far), they quickly resort to coercion – threatening private businesses, doctors, and hospitals with economic ruin if they don’t sign on to a bad deal.
Frequently Asked Questions About the Problems With the Public Option
What are the advantages of a public health insurance option?
In theory, the advantages of a public option include lower premiums, broader coverage, and more affordable deductibles and copays.
Democrats in Congress and in state legislatures have generally argued that a public option would provide a competitive alternative to private insurance companies.
What are the disadvantages of a public option?
The disadvantages of a public option include potential disruption to the private insurance market, concerns about government control over healthcare, and shortages as providers pull out of the market or leave the state altogether.
These shortages, in turn, may result in potential long wait times for appointments, worse outcomes, and higher prices due to increased demand for services.
What are the public health insurance options being implemented in Colorado, Nevada, and Washington?
These are the first three states to have rolled out a formal public option for their residents.
The intent behind these public options is to provide more affordable coverage to hundreds of thousands of people by influencing what private insurance companies offer. But officials in each of these states are having significant problems getting premiums down and getting health care systems in these respective states willing to accept patients on the public option.
Have the public options in these states been successful so far?
No. An early look at the implementation of these public health insurance options in Colorado, Nevada, and Washington shows that they are not working out as hoped. Enrollment has been disappointing.
Meanwhile, state planners are having significant problems getting premiums down and getting health care systems in these respective states willing to accept patients on the public option.
Why are insurance companies and private market advocates opposing the public option?
Insurance companies and private market advocates view the public option as an inefficient and counterproductive interference in the health insurance markets.
They argue that central planning and price controls will fail, and providers will either refuse to accept the lower reimbursements mandated by these public options or leave the state altogether, resulting in health care shortages and driving pricing up.
How are insurance companies responding to the public option?
Insurance companies are trying to do everything they can to reduce costs but argue that providing the robust coverage required of public option plans and cutting costs isn’t realistic.
How can I find out if I can get a better deal on health insurance?
Contact an HSA for America Personal Benefits Manager for a free, no-obligation consultation and quote.
Does healthsharing save money compared to the public option?
Yes, healthsharing saves a significant amount of money per month compared to the unsubsidized cost even of a public option health insurance plan in any of these states.
However, depending on your income and the number of people in your household, the premium subsidy you may get under the Affordable Care Act could significantly reduce your out of pocket cost for health insurance premiums.
Unless you get a very significant subsidy under the Affordable Care Act, you will probably save money with a healthsharing plan compared to using traditional Affordable Care Act qualified health insurance.
However, healthsharing may not be appropriate if you have significant pre-existing conditions.
Click here to learn more about how healthsharing works.
It’s a good idea to look at both healthsharing and traditional health insurance options and consider the advantages and disadvantages of both.
For a free no-obligation consultation and analysis of your individual circumstances and recommendation, contact a Personal Benefits Manager today.
What is not sustainable will not be sustained. Hospitals operate on razor-thin margins as it is – especially in rural and poor areas. If providers cannot charge appropriately to provide healthcare services, they have no choice but to lower the level of care they provide, or close their doors.
If they must be coerced by threat of government action to enter into contracts against their will, they are not likely to provide the optimal level of care. And a bureaucrat waving a magic wand in an attempt to short circuit market prices will not change that.
When it comes to insurance, premiums are just part of the story. Consumers should also look at the quality of the facilities and care providers in the plan’s network, and choose the plan based on the total value of the package. Not on premium alone.
Price controls always cause inefficiency and shortages. Because if government coerces providers and takes away their choice to participate, it won’t be long until restricted networks and options and carriers pulling out of the market cause consumers to lose their choices, too.
Here are some additional articles on healthsharing programs: Best Healthshare Plans Comparison Guide 2023 | Direct Primary Care – 2023 Patients’ Guide [DPC Explained]
Here are some additional pages related to this article: All You Need To Know About Healthshare Plans | Healthshare FAQ: Answers to the Most Frequently asked Questions about Health Sharing Plans and Health Care Sharing Ministries (HCSMs)
Wiley is President of HSA for America. He believes that consumers should have choice and price transparency, so they can make the best healthcare decisions for their needs. Read more about Wiley on his Bio page.