States Are Eyeing A Public Option Through Rose-Colored Glasses (Especially Colorado)

Colorado’s public option proposal is the most extreme yet. Starting next year, all private insurers will have to offer a standardized plan subject to rules set by the state. The premiums must be at least 5% lower than they were in 2021. In 2024, premiums must be 10% lower; and in 2025, 15% lower. If insurers miss those targets, they will be hauled before state officials and forced to justify their premiums.

As part of those premium reviews, Officials could also dictate provider reimbursement rates. Those price controls could cause providers to cut staff or curtail service. And that could lead to lengthy waits for care.

March 14, 2022 – The Affordable Care Act will notch its 12th birthday later this month. To get the measure through Congress and to President Obama’s desk for his signature, Democrats had to cut one of progressives’ signature proposals—a public health insurance option.

But the public option didn’t die all those years ago. President Biden campaigned on the idea during his run for the White House, in contrast to his rival Sen. Bernie Sanders’s proposal for Medicare for All.

Biden and Democrats in Congress haven’t been able to advance a public option at the national level. So several states have picked up the baton. Three have green-lit their own state-level public option plans. Over a dozen more are considering similar schemes.

The public option’s champions argue that a government-sponsored plan can increase competition in the marketplace and keep insurance premiums in check. Who could oppose more competition and lower prices?

But the public options that have taken root thus far aren’t delivering on those promises. Consider Washington, which became the first state to implement a public option in 2019.

Last year, the state’s Cascade Care plans cost up to 29% more than private exchange plans. According to reporting from Bloomberg Law, Washington’s “program is resulting in higher premiums than private-sector plans in many instances, the opposite of what was forecast about a ‘public option’ by proponents.” It’s no wonder only 2.5% of Washingtonians enrolled in Cascade Select plans in 2021.

Advocates of the public option are perturbed the rollout didn’t go as planned. They’ve blamed its failures on hospitals, some of which have declined to accept the public insurance plans.

Why would they? Public option plans reimburse providers at a rate that’s just slightly higher than Medicare’s. Hospitals nationwide claim they receive just 84 cents for every dollar they spend treating Medicare beneficiaries. In 2017, private plans paid hospitals 241% of what Medicare paid, according to research from the RAND Corporation.

Rather than raise reimbursement rates to try to incentivize providers to participate in the public option, state leaders are just ordering them to do so. Last May, Governor Jay Inslee signed Cascade Care 2.0 into law, which essentially mandates that providers contract with public option plans and establishes “enforcement mechanisms” if they refuse to comply.

Despite Washington’s public option troubles, other states are following its lead. Last year, Nevada lawmakers passed a law requiring the state to implement a public option by 2026.

The Silver State legislation mandates that premiums be 5% lower than the benchmark Affordable Care Act premium in every zip code in the state. It also requires any provider who accepts Medicaid or participates in the state’s employee benefit system to take at least one public option plan.

In other words, Nevada isn’t even trying to make an attractive reimbursement offer to the state’s providers. It, too, is requiring them to participate.

Doctors have several years to prepare for that reality. Some may decide to limit the number of public option patients they’ll see. Others may leave Nevada for states without a public option—or decide to retire early.

The result will be less care for everyone. The waits may be particularly bad for people with low-paying public coverage.

Colorado’s public option proposal is the most extreme yet. Starting next year, all private insurers will have to offer a standardized plan subject to rules set by the state. The premiums must be at least 5% lower than they were in 2021. In 2024, premiums must be 10% lower; and in 2025, 15% lower. If insurers miss those targets, they will be hauled before state officials and forced to justify their premiums.

As part of those premium reviews, Officials could also dictate provider reimbursement rates. Those price controls could cause providers to cut staff or curtail service. And that could lead to lengthy waits for care.

Whether on the state or national level, a public option will lead to the same results: higher costs, fewer providers, and rationed care. That should give pause to officials in the 16 states—from Maine to California—where a public option is on the table.

SOURCE: FORBES / March 14, 2022 / Contributed By: Sally Pipes – President of the Pacific Research Institute

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