By Sally C. Pipes / For The Herald
A health insurance “public option” is a long-cherished goal for many Democrats. Yet, progress on that goal has stalled at the national level. But three states — Washington, Nevada, and Colorado— have gone ahead with such schemes. Another 16 are considering them.
Washington’s public plan is about to complete its first year in business. Colorado officials, meanwhile, have to create their standardized health benefit plan by the end of this year.
We can be sure that the White House and Democrats in Congress are watching to see how these state-level experiments pan out with an eye on eventually taking them nationwide, as President Biden campaigned on doing.
So far, the results are not promising.
A public option is a plan offered by the government for sale alongside those sold by private companies. That may sound benign. But these government “options” are the first step to driving private insurance companies out of the market. That would put us on a path to the single-payer, Medicare for All-style system that Biden attacked during his run for the White House.
Washington state ratified the first state-level public option in 2019. Cascade Care opened for enrollment in November 2020, with coverage that took effect at the beginning of 2021. It has failed to fulfill its goals. Premiums are not down; they’ve gone up 4 percent. In ten of the counties where it’s available, Cascade Care is not even the lowest-premium option.
No wonder less than 1 percent of individual healthcare shoppers chose the public plan.
Hospitals and providers are refusing to take Cascade Care because of its low reimbursement rates. The public plan pays providers no more than 160 percent of the Medicare rate. Other exchange plans pay an average of 174 percent of Medicare. So it’s no surprise that hospitals are saying no.
In 20 of the 39 counties in Washington, including Snohomish County, the public option is not even available.
State legislators have a bill in the works that would force hospitals to accept Cascade Care despite the low compensation. That’s a surefire way to strain hospitals’ finances. Providers could respond by hiking what they charge people with private insurance. So the privately insured could soon face higher premiums.
Undeterred by the Evergreen State’s struggles, Nevada and Colorado signed public-option bills into law this summer.
Nevada aims to encourage signups by mandating lower premiums. Under the new law, Nevada residents will be able to purchase a Medicaid-like plan from any private insurer that provides Medicaid coverage in the state. Those plans must offer a 5 percent discount on premiums.
Colorado’s new law takes a different approach. It gives the state the power to regulate insurance plans sold to individuals and small businesses, requiring private insurers to slash premiums by 15 percent.
In both Nevada and Colorado, these lower premiums may get more people to enroll. And if enough patients are willing to sign up, providers may have no choice but to accept them. Yet if that happens, the state will have effectively imposed price controls on doctors and hospitals.
That could have dire consequences for the states’ health insurance markets. A recent analysis from the RAND Corporation found that a public option could force other insurers to “exit markets or otherwise react negatively if … they are unable to match the public option’s cuts to provider payments.”
In the fantasies of public-option proponents, more government involvement in health insurance can lower premiums for consumers while making benefits more generous and reimbursing providers at sustainable rates; all without negative consequences.
State-level experiments with the public option are already showing otherwise.
Sally C. Pipes is president, chief executive and the Thomas W. Smith fellow in health care policy at the Pacific Research Institute. Her latest book is “False Premise, False Promise: The Disastrous Reality of Medicare for All” (Encounter 2020). Follow her on Twitter @sallypipes.
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