State Public Option Plans Are Making Progress on Reducing Consumer Costs

Public health insurance plans, or state public option–style plans, offer states a way to contain health care costs, by putting downward pressure on health care prices and insurers’ administrative costs. They also can help states increase plan choices for consumers, expand access to coverage for underserved populations, such as undocumented immigrants, and advance health equity. Public option programs — while not the only mechanism to pursue these goals — are a solid strategy for states, as demonstrated by evidence from this past year. Like most state efforts to contain health care costs, they continue to face robust industry opposition.

First-Generation Public Option–Style Programs (Mostly) March Ahead

As we have written previously, three states — Washington, Colorado, and Nevada — have been early adopters of state public option legislation, albeit by pursuing an untraditional model that relies on private insurers to offer public option–style plans that advance state goals.

Washington and Colorado, which have operational programs, are seeing incremental progress. In Washington, public option plan rates will increase in 2024, but at a slower pace than non-public option plans (+5% compared to +8%). Similar to this past year, in 2024 they are expected to be the lowest-cost silver plan in most counties (to which premium tax credits are pegged). Public option plans will be offered in 37 of 39 counties, up from 34 in 2023.

Despite opposition from the insurer and provider communities, the Colorado Option program has generated savings for consumers while offering more comprehensive benefits and increasing transparency around health insurance premiums and provider reimbursement rates. Requested increases for Colorado Option plans were more than 30 percent lower than non-Option plans and, following the state’s subsequent rate review and hearing processes, the state announced that 25 individual market and 24 small-group market Colorado Option plans will meet the state’s target of a 10 percent reduction in premiums compared to 2021 levels. The federal government also recently affirmed that the program is expected to generate savings from reductions in plan premiums.

Nevada’s public option initially faced opposition from the state’s new governor, but officials recently announced it will proceed in combination with a “market stabilization program” funded by federal savings generated by the public option. While the prior administration initially proposed using these savings to support a new state subsidy program, the current plan is to establish a reinsurance program to insulate insurers from the most expensive health claims and thereby reduce premiums. Nevada is expected to apply for a federal waiver to authorize its program this winter.

Second-Generation Public Option Programs Are on the Horizon

Maine, Minnesota, and New Mexico passed legislation earlier this year laying the groundwork for future state public option programs. In advancing these bills, policymakers and advocates highlighted their goals of increasing health care affordability and, in some instances, expanding access to coverage for immigrant populations.

Notably, all three states are considering options other than the private insurer–led model used by the programs discussed above. Maine and New Mexico enacted laws requiring the government to study whether and how to create public option programs that would build on their state Medicaid programs by allowing consumers to buy coverage through these programs. This “buy-in” approach generally means the state will have greater control and responsibility over the program, but also introduces complications, including the need to seek additional waiver approval from the federal government.

Minnesota is also considering a buy-in option but is focusing on expanding MinnesotaCare, the state’s Basic Health Program. The Basic Health Program was created by the Affordable Care Act and allows states to leverage federal financial assistance typically used to subsidize private insurance purchased through health insurance marketplaces to instead fund a state coverage program for individuals with incomes up to 200 percent of the federal poverty level. MinnesotaCare and the state’s Medicaid program are run by the same agency; MinnesotaCare provides more generous benefits than marketplace coverage at lower premiums. The state’s recently enacted law allows the state to study and pursue different public option models in addition to the MinnesotaCare buy-in.

These laws don’t guarantee that the states will ultimately authorize and fund public option programs. But the laws signal that states remain committed to exploring proposals. Minnesota’s law authorizes the state to submit a section 1332 waiver and, if it is approved, implement a public option for 2027.

Looking Ahead

States across the country remain motivated to adopt reforms that improve affordability and expand access to coverage for populations that still lack access to care. Because of their potential to tackle both issues at the same time, public option programs remain a key candidate for consideration.