Public Option(al): What Happened to Biden's Big Idea?
April 29, 2021
Despite President Biden’s campaign promise to create a public option, the policy has been missing from his first 100 days in office. A handful of states, however, are forging ahead with public option legislation.
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The Basics: What Exactly is a Public Option, Anyway?
A public option sounds simple, but the term has become a confusing kind of catch-all for any significant government intervention in the individual insurance market. The most common goal of any public option approach is to make health insurance more affordable for individuals (and sometimes small businesses) that buy insurance on their own.
According to Heather Howard, who directs the State Health and Value Strategies program based at Princeton University, a government (state or federal) can implement a public option in a variety of ways:
- Offer its own government-run plan
- Contract with insurance companies to offer a new kind of plan
- More heavily regulate existing plans to control costs and standardize coverage
Some may question whether all of those approaches meet the traditional “public option” criteria, but Howard said the concept’s definition has evolved to reflect political realities. “We started really narrowly — it’s got to be the government offering the plan — but I think we always knew that was [unlikely] to happen and we’re seeing different shapes and sizes now,” said Howard.
Regardless of the implementation details, a public option fundamentally works by putting pressure on providers to lower their prices. That pressure can be applied more directly, for example, by capping the rates hospitals can charge (as Washington state has), or indirectly, such as setting insurance premium reduction targets (as Colorado’s current bill does).
The Feds: Prioritizing the ACA Over a Public Option
President Biden campaigned on a promise to create a public health insurance option, but he has not included it in any of his major legislative proposals to date. Instead, Biden has prioritized strengthening the Affordable Care Act by bulking up subsidies to help people pay for plans purchased on Obamacare exchanges.
The American Rescue Plan, signed into law in March, made the subsidies (also known as premium tax credits) more generous and available to more people. These changes are set to expire in two years, but Biden is proposing making them permanent as part of his new American Families Plan.
The enhanced subsidies are expected to bring insurance premiums down significantly and boost enrollment in plans purchased through the exchanges. The subsidies may also change the calculus for state lawmakers considering their own public options, said Georgetown professor Sabrina Corlette.
“One of the policy rationales for a public option at the state level [was] to try to help people find a more affordable source of coverage.” With the new subsidies in place, Corlette expects some state policymakers to ask themselves, “What do [we] need a public option for?”
The States: Evolving Approaches to a Public Option
In recent years, several states have explored their own versions of a public option. Unlike Obamacare subsidies, a public option has the potential to help states pressure insurers and providers to lower the underlying prices that drive up health care costs.
“These [federal] subsidies are just moving money around on the table,” said Heather Howard. “Consumers who are on the marketplace are going to be much better off, but the subsidies are not relieving that underlying pressure — the actual cost of health care.”
Those costs, said Howard, constrain state budgets and crowd out competing policy priorities, like education. They are also the main reason why Howard believes at least a handful of states will continue to pursue public option policies.
Washington state’s public option, which is carried by private insurers, debuted on the market in 2021. Plans are only available in half of counties, largely due to a lack of provider participation. Early enrollment has been low and premiums have been higher than expected.
The state legislature just passed SB 5377 with the goal of addressing the original law’s shortcomings.
HB21-1232 would compel insurance companies to carry a more heavily regulated and standardized plan option that would be subject to a premium reduction target of 18% over three years.
Lawmakers recently removed some of the bill’s more aggressive provisions to try to neutralize fierce industry opposition.
Introduced just this week, SB 420 would require insurers who contract with the state’s Medicaid managed care program to also begin offering a public option plan. Providers that serve Medicaid enrollees or state employees would also be required to participate in at least one public option plan.
Several states have commissioned studies analyzing public option approaches in recent years. A couple of states with new study activity are:
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Related Resources and Reporting on the Public Option:
State Public Options: Comparing Models from Across the Country (California Health Care Foundation and Manatt Health Strategies, March 2021)
Comparing Public Option and Capped Provider Payment Rate Proposals (Linda Blumberg, Urban Institute, 3/17/2021)
Democrats treading lightly on Biden’s next big health care promise (Alice Miranda Ollstein and Joanne Kennen, Politico, 3/16/2021)
Private Insurance Wins in Democrats’ First Try at Expanding Health Coverage (Sarah Kliff, New York Times, 3/5/2021)
From Incremental to Comprehensive Health Reform: How Various Reform Options Compare on Coverage and Costs (Linda Blumberg, John Holahan, Matthew Buettgens, et al; Urban Institute; 10/16/2019)
Sabrina Corlette, JD, Research Professor and Founder, Center on Health Insurance Reforms, Georgetown University
Heather Howard, JD, Lecturer and Director, State Health and Value Strategies, Princeton University
The Tradeoffs theme song was composed by Ty Citerman. Additional music provided by Blue Dot Sessions and Rockapella.
This episode was produced by Leslie Walker and mixed by Andrew Parrella.
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