Options for Designing a Public Option
May 28, 2020
There is growing interest in a "public option" for individual market insurance to improve affordability and enrollment. The authors consider four public option alternatives that vary based on the rates providers are paid, whether the option is implemented on or off Health Insurance Marketplaces, and whether premium tax credits are available to higher-income individuals.
Assessing the Effects of Four Public Option Alternatives
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The Affordable Care Act (ACA) brought substantial changes to the individual health insurance market. However, health care remains unaffordable for many, and enrollment in individual health insurance plans has declined since 2016. There is growing interest at the state and federal levels in a "public option" for individual market insurance. In 2019, members of Congress introduced four bills that would create a federal public option, at least 18 states considered legislation for a public option or a Medicaid buy-in option, and several Democratic Party presidential candidates included public options in their platforms. Some proposals for a public option would create government-run insurance plans to compete with private insurance, and others would create plans administered by insurance carriers operating under government oversight and rate regulation.
The authors consider public option alternatives that vary based on the rates providers are paid, whether the option is implemented on or off Health Insurance Marketplaces, and whether premium tax credits are available to higher-income individuals. For each of the four scenarios, the authors use a microsimulation approach to estimate how adding a federal public option for individual market insurance could affect overall insurance coverage, individual market enrollment, premiums for individual market enrollees, and government spending. The trends and policy implications may be of interest to state and federal policymakers considering a public option.
Discussion and Conclusion
Sensitivity Results Without Competition Effect
Supplemental Results for Individuals Who Were Better or Worse Off
This research was funded by a grant to Wakely Consulting Group from the Robert Wood Johnson Foundation and carried out within the Payment, Cost, and Coverage Program in RAND Health Care.
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