A Roosevelt report assesses the ways state-based public options balance affordability with expanded access to medical care
New York, NY—March 23, 2020, marked 10 years since the passage of the Affordable Care Act (ACA). That date also coincided with burgeoning COVID-19 caseloads and widespread job loss—two crises that have spotlighted the coverage gaps and health disparities that the ACA was unable to fully address. With this Congress unlikely to expand or improve on the ACA, some states have explored the potential of introducing public insurance options to bolster the viability of their insurance marketplaces and improve consumer affordability, and these proposals offer an opportunity to explore the trade-offs central to the design of public health insurance.
State Insurance Reforms and the Trade-Offs of a Public Option, a report released today by the Roosevelt Institute but written at the onset of the COVID-19 crisis, analyzes states’ efforts to design public option proposals in relation to the policy trade-offs embedded in the public option as a policy framework. Specifically, the paper explores legislative momentum in states like Washington and Colorado, which are designing public options that would be administered by private insurers under the direction of the state and sold in state marketplaces alongside existing private insurance products, and New Mexico, a state that is considering a more dramatic proposal for a Medicaid buy-in, in which consumers could elect to purchase coverage similar to Medicaid.
Authored by Naomi Zewde (Roosevelt fellow and assistant professor of health economics at the CUNY School of Public Health) and Adam Biener (assistant professor of economics at Lafayette College), the research finds that:
- There are a number of distinct public option proposals: While many states are contemplating Medicaid buy-ins that could more aggressively compete with private alternatives, some states are considering state public options administered by private insurance plans with less consumer savings but more robust physician participation;
- Public options must balance consumer affordability against market stability: Public option insurance plans can offer lower premiums through lower physician payments coupled with narrow networks, and potentially through lower administrative rates. But the challenge of retaining a functional private market acts as a constraint on the extent of consumer savings;
- Public options can meaningfully lower health care costs for non-group enrollees: A Medicaid buy-in option could lower plans’ medical costs by as much as 13.6 percent relative to the current marketplace, by paying health care providers at lower rates, similar to the Medicaid program;
- Many consumers are poised to switch to public option plans: Consumers who purchase health insurance through their state exchanges are very sensitive to small changes in prices. Some evidence indicates that consumers are highly sensitive to nominal premium differences in the tens of dollars;
- Public options may apply further strain to the health care safety net to achieve greater affordability: In order to offer lower premiums, public options will steer enrollees to narrow networks of physicians reimbursed at low rates, as is typical among many Medicaid-like plans. Without new participating providers, safety-net providers may become strained by a greater population of patients with lower reimbursements.
“State-level public option efforts demonstrate the tight balance, or trade-off, between providing consumer savings and maintaining market competition,” said Zewde. “Many Americans who have health insurance coverage face a significant financial burden, and this reality needs to be central to government-run insurance design.”
“Lack of insurance coverage may prevent individuals from seeking or receiving medical care due to actual or perceived cost,” said Biener. “As related to the current coronavirus pandemic, state-based public options could increase access to COVID-19 testing or future potential therapies through cost reductions and more reliable access to medical care.”
As the nation struggles to ensure testing access for millions of uninsured and underinsured Americans and to finance medical care for those who have contracted COVID-19, these state-level efforts have become even more critical.
In a Roosevelt “Why This Matters,” Matt Hughes (editorial manager) expands on the case for universal health care. Read it here.
About the Roosevelt Institute
The Roosevelt Institute is a New York-based think tank that, in partnership with its campus network and the FDR Presidential Library and Museum, is working to redefine the American economy. Focusing on corporate and public power, labor and wages, and the economics of race and gender inequality, the Roosevelt Institute unifies experts, invests in young leaders, and advances progressive policies that bring the legacy of Franklin and Eleanor into the 21st century.
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