April 10, 2023 | News

Newsmax: State Public Option Reforms Reveal Folly of Gov’t Healthcare

Over the last few years, several states have tried their hand at creating a “public option” health insurance plan. Their experiences offer a cautionary tale to those pushing for similar reforms at the federal level —as well as to states considering public options of their own.

In its purest form, the public option is a government-run health plan that competes alongside private alternatives in the marketplace. But some states are turning to private insurers to run publicly chartered plans.

For instance, the public option Colorado implemented last year requires all private insurers to offer at least one policy that meets certain government standards — a plan design lawmakers have dubbed the “Colorado Option.”

Specifically, these plans must reduce premiums gradually each year. In 2023, insurers had to cut premiums by 5% from 2021 levels. In 2024, premiums must be 10% below 2021 levels.

And by 2025, the law requires a 15% premium reduction. Coverage providers must meet these premium standards while also providing a mandated set of benefits.

In effect, Colorado lawmakers have envisioned their ideal health plan — as well as their ideal premium levels — and forced private providers to manifest this fantasy, regardless of whether the Colorado Option is economically feasible.

Wishful thinking is no substitute for sound policy, as Colorado has now learned.

The first sign of trouble came this year.

One would imagine that a health plan that offers a wide range of benefits at a below-market price would be widely popular.

Yet Colorado patients weren’t impressed. In the 2023 plan year, just one in ten marketplace insurance customers signed up for the Colorado Option.

This year, the Colorado Option faces yet another problem. All but one state insurer has notified the government that it can’t meet the mandated premium target for 2024 — at least not without losing significant sums of money.

This was an all-too-predictable outcome, of course.

The architects of the Colorado Option thought they could do a better job than the market at designing an insurance policy and setting prices.

What they ended up with was a health plan that patients don’t want and insurers can’t afford to sell.

Washington state’s public option experiment hasn’t gone much better.

The state was the first in the nation to attempt such a coverage scheme.

And like Colorado, it took a public-private approach, in which insurance companies were asked to offer a plan that met the government’s requirements.

The state contracted with only five insurers, each of which agreed to offer “Cascade Select” plans that met stringent government requirements, including an aggregate limit on payments to providers.

Providers balked at the public plans’ meager reimbursement rates and refused to participate in their insurance networks. So less than half of counties were able to offer Cascade Select plans in 2021.

Now state officials are forcing hospitals participating in other government programs to accept at least one Cascade Plan.

In other words, Washington has turned from carrots to sticks to get its public option a foothold in the market.

The struggles that Washington and Colorado have faced have not dissuaded other states from trying to install public options.

Nevada will roll out its own in 2026.

Like Washington, it’s relying on force to get the plan launched.

Any insurer that wants to participate in the state’s Medicaid managed care program must also submit a bid for a public option plan. Similarly, providers that accept Medicaid or other state plans must take the public option, too.

The implicit goal of all these public option plans is to nudge aside private insurance — until the state-chartered plan dominates the market. At that point, banning private insurance altogether — and forcing everyone into a government-run plan  will be the natural next step.

Threats appear to be the only way that state governments can get their public options off the ground. But that strategy is not sustainable. Eventually, insurers and providers will refuse to play along  or will exit the market entirely. That crisis of access is not something states should tempt.

Read the full article by Sally C. Pipes from Newsmax.


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