The Next Wave of State Healthcare Reform
One of President Biden’s central campaign messages focused on expanding the public health insurance market.
At the same time, multiple states are moving on their own ideas of a public option by conducting research and/or attempting to pass legislation that reflects state-specific policy objectives. While some public option models may be budget neutral, such as a public-private partnership using carriers on the individual market, others may require state investment to implement.
States will likely continue to evaluate whether this form of government-run healthcare is an effective lever to increase market competition and promote cost-containment.
Will President Biden’s push to expand the ACA slow state efforts to stand up public option plans?
What Employers are Working On
Some employers are banding together to increase their buying power, an idea explored publicly by Amazon, JP Morgan and Berkshire Hathaway through the creation of the healthcare entity, Haven, which was ultimately disbanded earlier this year.
More recently, public employers in Colorado teamed up with national companies to jointly purchase healthcare through a new buying group. The move could become a blueprint for employers in other states seeking more bang for their healthcare buck.
There has been a reduction in uninsurance rates in every state since the American Rescue Plan’s coverage expansions took effect. Nearly 31 million Americans have obtained health coverage through the ACA in 2021, a record high. The Biden administration reported that 1.2 million people signed up during the federal government’s special enrollment period alone.
The American Rescue Plan temporarily eliminates an income cap that restricted who qualifies for ACA tax credits to help offset the cost of monthly insurance premiums. It also limits the maximum amount individuals must pay for coverage to 8.5% of income, and boosts subsidies to lower-income consumers.
On top of these expansion efforts, some states already use existing elements of the ACA—like the Section 1332 waiver—to reduce premiums in the individual market. Those waivers help to secure federal “pass-through” funding to cover a large portion of the cost of reinsurance programs. Some of the most successful state-run reinsurance programs have reduced unsubsidized premiums up to 37%.
Efforts to pass bipartisan legislation that strengthens the ACA—like enhancing the subsidy structure—will likely impact states’ willingness to explore a public option. For example, if the federal benchmark shifted to gold-level qualified health plans, that would reduce pressure on states to promote higher-value plans and provide state subsidies.
Leader’s Edge tracked the states moving toward a public option and how they’re going about it.
|California||Sponsored by California Nurses Authority, CalCare would provide healthcare free at the point of service to individuals regardless of employment, income, immigration status, race, gender, or any other considerations. The program would be funded by federal and state government agencies along with additional revenue sources, like a wealth tax, to be determined by the California State Legislature. The estimated cost is around $400 billion a year, similar to the failed 2017 single-payer bill.|
|Colorado||The “Standardized Health Benefit Plan Colorado Option,” which was initially proposed as a full public option, will require insurers to offer the Colorado Health Benefit Option by Jan. 1, 2023, in all 64 counties. It will be available for the individual and small group marketplaces, which cover about 15% of Coloradans. By 2025, its premiums will have to be 15% less than the rates insurers offered in 2021 (adjusted for medical inflation). It will also set benchmarks for the types of care covered under the plan, including pediatric care and other essential benefits.|
|Connecticut||“An Act Establishing Single Payer Health Care Program” was introduced in January 2021 to establish a self-insured single payer healthcare program paid for through a new tax to be paid in lieu of premiums. Legislators dropped the plan in May because of opposition from Gov. Lamont.|
|Maine||“An Act to Support Universal Health Care” was introduced in March 2021 to ensure all residents are covered regardless of employment status. The proposal calls for the development of an equitable and affordable premium structure based on income, including unearned income, and a business health tax based on payroll. Cost-sharing would also be eliminated. Federal funds received by the state, including premium subsidies under the ACA would be appropriated for the administration of this new health plan.|
|Massachusetts||The “Act Establishing Medicare for All in Massachusetts” that was proposed in February 2021 will guarantee healthcare access for every state resident through a single payer healthcare financing system. The bill proposes the creation of the Massachusetts Health Care Trust to collect and distribute funds related to covering healthcare services. The program would be funded through a new tax on employers, workers and residents.|
|Nevada||Gov. Steve Sisolak signed into law a bill that paves the way for Nevada to become the second state to offer state-managed health insurance plans by 2026. The new law, signed on June 9, 2021, requires insurers bidding to cover Medicaid recipients and state employees to also bid to offer a public option plan. State officials would select in-network providers for the public option plan and mandate that they charge 5% less in monthly premiums than the average plan on the state insurance marketplace and 15% less four years after it is first offered. To enter the market, the public option plan will have to undergo an actuarial study and then the state would need to apply for a waiver from the federal government.|
|New Jersey||Introduced in January 2021 and now in committee, New Jersey’s Medicare expansion bill proposes extending Medicare coverage to every New Jersey resident, regardless of age, health, or disability status. CMS would estimate the cost of providing Medicare for all New Jersey residents, and will deduct the estimated revenue from Medicare and Medicaid payments that New Jersey residents, the state, and the federal government pay to offset those costs.|
|New York||The New York Health Act, comprised of two companion bills that would create a single payer healthcare system, was introduced in March 2021. The program would be funded by income and payroll taxes as well as federal payments received for providing Medicare, any federally-matched public health program, or the ACA.|
|Oregon||In December 2020, Manatt Health, on behalf of the Oregon Health Authority, released the results of a study that considers the steps to necessary to create a “Medicaid Buy-in program or public option.” The study, which was required in response to insurer concerns, evaluates three proposed delivery models: a coordinated care organization-led model utilizing the existing Medicaid network, a carrier-led model, and a state-led model in partnership with a third-party administrator, where the state holds the plan risk as the insurer. The study will be used to inform policy decisions around a bill that would establish a state-sponsored public option. Currently, about 94% of Oregon adults are covered with Medicaid, Medicare, commercial health insurance, or some other program.|
|Rhode Island||The “Rhode Island Comprehensive Health Insurance Program” would establish a single-payer healthcare insurance program. The bill was introduced in February 2021. The program would be paid for by consolidating government and private payments to multiple insurance carriers into a Medicare for All-style single-payer program and substituting lower progressive taxes for higher health insurance premiums, co-pays, deductibles and costs in excess of caps. The bill references the success of Canada’s single payer program in a particular province with roughly the same number of residents as Rhode Island.|
|Washington||2019 legislation established Washington’s public option program, making it the first state-run solution in the nation. Medicare-level provider reimbursement rates were initially proposed, but the cap was later amended to 160% of Medicare rates. Consequently, public option plan premiums were on average 4% higher than private plans offered on the health insurance marketplace. Less than 1% of enrollees opted for a public option plan. In 2021, 13 insurers opted into the exchange. Washington insurance companies now offer two new types of plans on the insurance exchange: 1. Cascade Plans, which include additional benefits beyond a standard plan that are set by the state. 2. Cascade Select Plans, also known as the public option. The state uses rate setting to limit the prices that the insurance companies pay to hospitals under these plans.|