“Public health insurance, in the form of Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP), has existed in the United States for decades, as have proposals to expand those programs. However, the public option, which first surfaced in 2001–02, represented an entirely new idea. The concept was to offer a pub licly insured plan in direct competition with other options for private health insurance coverage, in the hope of driving down both premiums and underlying health care costs.
“Birth In California
“The idea of a public option within a state-based health insurance exchange was initially set forth in a proposal known as CHOICE. This was part of California’s Health Care Options Project (HCOP),1 an initiative to update and develop ideas and options on how to expand coverage in California, and was funded by a federal planning grant to the state Health and Human Services Agency. The CHOICE proposal2 built on the model of managed competition, with its array of competing private managed care plans. However, it added a new option, the public option, to the exchange, to broaden the array of choices available to individuals and families. The public option was also designed to compete with private plans in the exchange and to serve as a policy compromise between a single-payer system and managed competition among private plans.”
Source: Helen A. Halpin and Peter Harbage, The Origins And Demise Of The Public Option, Health Affairs 2010 29:6, 1117-1124.
“Washington State made history recently with passage of Chapter 364 – a new law that is poised to revolutionize the state’s individual insurance market. The law takes a multi-pronged approach to its market redesign by:
- “Creating a quasi-public option product for Washington’s individual market;
- “Requiring standard plan design for plans sold on its exchange; and
- “Developing a plan to implement and fund subsidies for individuals earning less than 500 percent of the federal poverty level (FPL).
“Washington’s quasi-public option is the first-in-the-nation requirement that a state agency – Washington’s Health Care Authority (HCA) – contracts directly with at least one private insurance carrier to offer individual market coverage on the exchange. Through these contracts, the state will require health plans to meet a series of goals and requirements including:
- “Reimbursements capped at 160 percent of Medicare rates;*
- “Standard plan design (see details below);
- “Population health improvement;
- “Alignment with state value-based purchasing models; and
- “Incorporation of recommendations from Washington’s Bree Collaborative, a multi-stakeholder group tasked with improving health care quality, outcomes and affordability, and the health technology assessment program.
“The carrier that contracts to sell these plans must make the plans available in at least one county in the state, and must offer at least one bronze, one silver, and one gold value plan. The intent is that the quasi-public plans will cost less and be higher-value to entice consumers to purchase these plans.”
Source: Christina Cousart, How Washington State Is Reducing Costs and Improving Coverage Value – A Q&A with its Health Benefit Exchange CEO. National Academy for State Health Policy. August 5, 2019. Last accessed Jan. 18, 2020.
“The innovation of the Washington bill relates to its requirement that the state Authority contract with at least one insurance carrier to offer a Bronze, Silver, and Gold standard plan in at least one county, with the goal of ensuring at least one of these state-contracted plan options is available in each county in 2021.
“These plans are really where the “public” aspect of this policy comes more explicitly into play. While they must meet all requirements of other Exchange plans, the bill holds these them to a much higher standard than for those otherwise offered, including a robust contracting process that will include direct negotiation with the state Authority.
“In those negotiations, the state may consider the plan’s rates, utilization management techniques, pharmaceutical costs, and other factors in determining whether or not to approve its participation in the Exchange market. These state-contracted plans – I’m going to go ahead and call them the “public option” – are also held to higher standards of transparency, reducing administrative burden, aligning with state value-based purchasing programs, etc., that befit a more publicly-interested plan.”
Source: “Public Option 1.0: Washington State Takes An Important Step Forward,” Health Affairs Blog, May 1, 2019. DOI: 10.1377/hblog20190430.353036