State Public Option Plans Don’t Reduce Premiums, Result In Low Enrollment: Industry-Backed Study

Instead of enacting public option plans, states should target reinsurance programs, a new report from the Partnership for America’s Health Care Future argues.

The group includes a collection of health plans, hospital groups and pharma companies brought together largely to oppose Medicare for All. This study was authored by three policy experts with the Hoover Institution at Stanford University.

States with public options fail to curb premium spending and fail to meet reimbursement rate targets, the analysis contends.

Public option advocates believe widespread implementation will reduce premiums and expand coverage. State public option plans rely on insurers to administer plans.

The Colorado public option plan has had premiums lowered 30% compared to non-option plans, and 49 plans experienced premiums decrease compared to 2021 levels, the state said last year.

But the partnerships’ report finds only 15% of plans in Colorado met initial-year premium targets, a percentage that shrank in Year 2.

“In 2022 and 2023, aggregate premiums for Washington State’s public option plans were 2 million more than if public option participants had chosen the lowest-cost non–public option,” the authors said. “In Colorado, the figure was 13.3 million in 2023.

“States have failed to meet their premium targets in part because policymakers have been unwilling or unable to secure sufficiently low reimbursement rates,” they added, going through examples in Colorado, Washington and projections in Nevada showing unintended consequences these reimbursement rates cause.

In Washington, the state set the reimbursement rate at 160% of Medicare-level rates, and, in Colorado, the state implemented floors on hospital rates. These policies create unintended side effects, they say.

As a result, public option plans in Washington and Colorado enroll less than 1% of their states’ populations.

Nevada’s public option does not begin until 2026, though projections indicate the state will have to cut hospital reimbursement rates and establish rules on insurers’ admin costs to meet premium reduction goals.

The study suggests states turn their efforts toward reinsurance programs, arguing these programs do better at reducing premiums because enrollment is not limited to state-sponsored plans.

Nevada requested that the Centers for Medicare & Medicaid Services pause its Affordable Care Act 1332 waiver in March, said KFF Associate Director Krutika Amin. It included a reinsurance program and a public option.


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