Are State Public Option Health Plans Worth It?
85 Pages Posted: 29 Mar 2021 Last revised: 24 Jun 2021
Date Written: March 26, 2021
The 2020 coronavirus pandemic exposed the weaknesses of the U.S. health care system’s reliance on private, employer-based health insurance. The crisis in health care access and affordability has driven support for a public option—the choice to purchase a state-initiated health plan with publicly determined rates. Congressional gridlock, however, may dim the chances for a federal public option. States have stepped into the policy vacuum, proposing thirty-eight bills to establish a state public option in the past decade, including one that became law. This article provides a comprehensive survey and taxonomy of state public option proposals from 2010-2020, identifying three main models: Medicaid Buy-In Public Options, Marketplace-Based Public Options, and Comprehensive Public Options. Though each model serves different policy goals and varies in scope, the defining aim of all public option plans is to improve access to affordable health coverage by applying public payment rates to the private insurance market. We seek to answer whether state public option plans are legally viable and “worth it” for states to pursue. The answer is yes to both, but surprisingly, the degree of legal difficulty is inversely related to the scope of the plan’s reach—the broadest plans have fewer legal hurdles than narrower plans. Moreover, the policy effects increase with the scope of the plan and the robustness of the provider rate controls. Public options with modest provider rate controls may have too little impact on affordability and costs to make it worth the legal and political difficulty for a result that falls short of its defining goal of improving affordability. State public option plans may be most effective when they cover a broad swath of the population and pursue robust provider rate controls. In short, for state public option plans to be worth it, bigger is better.
Keywords: health insurance, health law, affordable health care, health care access, health policy, public health insurance
JEL Classification: K32, I13, I18
Suggested Citation: Suggested Citation