A public option refers to a health insurance coverage program run by the state or federal government (although they can be administered by a private entity or private insurance company) and made available as an option alongside the existing private health insurance plans. Public options are still mostly theoretical in the United States, although Washington State will debut its new public option program in the fall of 2020.
Does the ACA include a public option?
The Affordable Care Act legislation initially included a nationwide public option. But it was eliminated from the final bill amid opposition from Republicans and moderate Democrats, and also in an effort to win support from Sen. Joe Liberman.
How would a public option work?
In the ensuing years, various public option proposals have been put forth by states and by federal lawmakers. Varying approaches to a public option were supported by several of the candidates who ran for the 2020 Democratic presidential nomination. The health care platform of Joe Biden, the presumptive nominee, incorporates a proposal for a widely available public option that would be similar to Medicare but available for purchase by any American.
Public option concepts run the gamut from a strictly government-run and administered program, to Medicaid buy-in (which would generally incorporate private insurers that have Medicaid managed care contracts), to a quasi public-private program in which the government sets some or all of the parameters and reimbursement rates, and contracts with private insurers to offer the coverage.
Washington state will roll out the nation’s first public option in the fall of 2020. The plans will be offered by private health insurers, with provider reimbursements capped at 160 percent of what Medicare pays.
Colorado regulators and lawmakers spent much of 2019 working on a public option proposal that they hoped to make available by the fall of 2021. But the legislation to create the program was abandoned in May 2020 as a result of the COVID-19 pandemic. Lawmakers in Colorado hope to revive the bill in 2021.
Public option proposals often face an uphill battle in order to gain support and buy-in from private health insurers and hospital associations. Since the public option concept is based on a foundation of lower reimbursement rates for medical providers, hospitals and other providers worry that the plans will result in reduced revenue. And since the whole idea is to be able to offer health coverage with lower premiums, private insurers worry about the added competition.
Policymakers also have to be aware of the catch-22 that goes along with the introduction of a lower-cost health plan: If it takes over the benchmark spot in a given area, premium subsidies will drop for everyone in that area. That can result in higher after-subsidy premiums for people who enroll in any of the other available health plans.