What States Mean by a ‘Public Option’
A medical assistant gives a Seattle patient the flu shot. Washington last month became the first state to enact a â€œpublic optionâ€ for health insurance. Ted S. Warren/The Associated Press
When Democratic Gov. Jay Inslee last month signed a law creating a new health plan alternative for Washington state residents, many accounts proclaimed Washington to be the first state with a “public option.”
But the term is difficult to define — even the word “public” is slippery in the context of health care.
“Public option means the government being more prescriptive,” said Chiquita Brooks-LaSure, a managing director at Manatt Health, which provides consulting and legal services in health care. “There’s more of the state weighing in.”
In general, when policymakers use the term “public option,” they mean a health plan with significant government control. That might mean programs created and operated by government, as Medicare and Medicaid originally were, or programs largely under government control but run by private entities.
Public option is a “squishy term,” said JoAnn Volk, a research professor at Georgetown University’s Center on Health Insurance Reforms. “It does mean different things to different people, depending on your goals and assumptions.”
Whatever form it takes, proponents of a public option believe it would provide consumers with health insurance that is more affordable.
Jason McGill, a health policy adviser to Inslee who helped craft the law, noted that the term “public” in health care has already become muddied in recent years. Medicare Advantage plans — all-inclusive Medicare plans — are offered by commercial insurance carriers, and states contract with insurance companies to run their Medicaid managed care plans
“They are government plans,” McGill said, “but they are run by insurance companies.”
Washington state won’t be operating its own health plan. Instead, it will contract with a private carrier — or several — to oversee its public option, which will be on the health insurance exchange alongside commercial plans.
The Washington state plan also will have another layer of rules that officials think will lower premiums. Most notably, the public option plan would set a cap on reimbursement rates paid to providers.
The term “public option” emerged a decade ago during the debate over the Affordable Care Act, when Democrats proposed including a government-run insurance option alongside privately run insurance on the exchanges. But the version of the ACA that President Barack Obama eventually signed did not include it.
Interest in the idea endured, however.
In 2017 and 2018, the cost of private plans on the exchanges soared in many parts of the country, prompting at least 15 states to reconsider a public option through a so-called Medicaid buy-in.
Under this idea, states would use the infrastructure and purchasing power of their Medicaid agencies to create state-sponsored plans that would be cheaper than commercial products.
Nevada lawmakers passed a public option plan that would have allowed consumers who earn too much to qualify for Medicaid to buy into their state’s plan. But then-Gov. Brian Sandoval, a Republican, vetoed it, saying it might disrupt an already fragile market.
The breakthrough on the public option finally came last month in Washington when Inslee, who is running for the Democratic presidential nomination, signed the public option into law.
Premiums in Washington have increased by more than half over the past two years, but McGill said that wasn’t the only impetus for the law.
Only 61% of Washingtonians who buy insurance on the marketplace qualify for federal aid in the form of premium tax subsidies. That compares with 87% nationally.
Under the law, Washington must contract with at least one private carrier to begin offering a public option in the year 2021. Under the contract, the carrier would have to meet state requirements related to transparency, administrative costs and purchasing that do not apply to other carriers.
McGill said the goal is to keep premiums for the public option at least 10% lower than what commercial carriers charged the previous year. To do that, the state will limit reimbursement rates to no more than 160% of what Medicare pays. Originally, the legislature set the mark at 100%, but lawmakers realized that providers wouldn’t accept so little.
“A provider should jump at 160%,” McGill said. “We hope providers think that’s a fair rate.”
The law would also limit out-of-pocket expenses for deductibles and copayments.
The bill passed largely along party lines, with Republicans arguing against the creation of another government program.
The additional requirements, and particularly the ceiling on the reimbursement rate, goes a long way toward explaining what the “public” means in “public option,” said Brooks-LaSure of Manatt Health.
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