November 1, 2021, marks the first day of the open enrollment period for Washington State’s public option health insurance plans for 2022. Through the public option, now entering its second year, residents can purchase state-subsidized health care plans on the individual market — a private alternative to government-administered insurance programs like Medicaid. Public option plans are designed to be more affordable than other private plans, thereby creating marketplace competition that may lower premiums overall.¹ In 2019, Washington became the first state to pass legislation for a public option, with Colorado and Nevada bringing the number up to three states in June of 2021.²

These developments represent a broader push among Democrats to reduce coverage gaps without relying on a Medicare-for-All model or the provisions of the hotly-disputed Affordable Care Act (ACA), which the Supreme Court upheld in June 2021.² The number of uninsured people has decreased by roughly 18.2 million since 2010, when the ACA was enacted, but as of 2018, 30.4 million people remained uninsured.³ Studies by the Commonwealth Fund found that nearly half of uninsured adults in 2018 had incomes that made them eligible for Medicaid or subsidized plans, but one-third of these adults did not visit the marketplace because of concerns about affordability.⁴

Washington State enacted its public option, called Cascade Care, to provide an alternative plan for people seeking insurance from the individual market. The program has encountered substantial setbacks in achieving this goal, however. In 2021, 19 out of 39 counties in Washington did not offer the public option, and only about 2.5% of new enrollees in Washington’s marketplace chose Cascade Care.¹ The difficulty in implementing Cascade Care was partially a result of hospitals’ opposition to lower reimbursement rates, which are key to achieving affordability for patients. But because Washington’s legislation capped provider reimbursements at 160% of Medicare rates, most public option premiums were not significantly cheaper than those of private plans. Still, many hospitals declined to participate. In 2021, Washington state passed new legislation that effectively requires hospital participation.⁵

Colorado’s public option plans, which will be available for purchase in the fall of 2022, mandate that insurers reduce premiums by 15% over three years but leave industry players to determine how these cuts should be achieved.^2,5 Nevada’s plan, which has similar targets, will have plans available for purchase in the fall of 2025. Perhaps recognizing the setbacks faced in Washington state, both plans effectively require hospital participation and allow states to intervene in varying ways if private negotiations fail.²

Health policy researchers have expressed hesitation about the likelihood that public options will take hold and the benefits that they may afford. In the face of COVID-19, policies that place financial pressure on hospitals may be difficult to enact. Furthermore, the programs outlined in Colorado and Nevada’s legislation are reflective of systems that are largely still privately-driven, “stretching the definition” of a public option, according to an article in the New England Journal of Medicine.⁵ Still, the authors posit that, in spite of state-level financial and legal constraints related to health care reform, these satellite pilots have the opportunity to demonstrate improved affordability over time and serve as a model for other states.⁵

Of note, Colorado and Nevada’s public option programs will be available to any resident — not just those lawfully present.⁵ With 25% of uninsured adults being foreign-born Latinx individuals who may face barriers to acquiring insurance due to immigration status, the public option could help close this aspect of the coverage gap.⁴

Proponents of public options argue that Americans’ deeply imbedded preferences for their own providers make a public option more realistic for improving affordability than unwieldy spending models associated with Medicare-based approaches.⁶ These analysts emphasize that public option plans will require significant “legislative and governmental administrative backbone,” but that they may nonetheless be worthwhile experiments. With three new programs under development, the states can inform policy-design efforts that may drive future reforms on both a local and national level.

References

1. Norris L. Washington health insurance marketplace: history and news of the state’s exchange. Health Insurance.org. https://www.healthinsurance.org/health-insurance-marketplaces/washington/. Published September 1, 2021.
2. Abrams A. States are leading the way on a public health insurance option. Time. July 2021. https://time.com/6077007/states-public-option-democrats/.
3. Cohen RA, Terlizzi EP, Martinez ME. Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2018. Centers for Disease Control and Prevention. https://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201905.pdf. Published May 2019.
4. Gunja MZ, Collins SR. Who are the remaining uninsured, and why do they lack coverage? Findings from the Commonwealth Fund Biennial Health Insurance Survey, 2018. 2019. doi:10.26099/H0XY-AZ24
5. Fuse Brown EC, Gudiksen KL, King JS. State public option plans – too modest to improve affordability? N Engl J Med. 2021;385(12):1057-1059. DOI: 10.1056/NEJMp2111356
6. The case for the public option over medicare for all. Harv Bus Rev. October 2019. https://hbr.org/2019/10/the-case-for-the-public-option-over-medicare-for-all.