The health care plan laid out on Joe Biden’s campaign website lists creating “a public health insurance option like Medicare” as its first plank. Biden claims this plan would give patients “another, better choice” and will “reduce costs for patients by negotiating lower prices from hospitals and other health care providers.”
Unfortunately for the former vice president, Washington state’s rollout of the first state-based “public option” suggests the left’s supposed panacea for the health-care system has failed to meet expectations on both fronts. In offering higher premiums in many cases, and not offering a government plan in more than half of Washington counties, this “public option” has failed to deliver.
Government Price Controls
In May 2019, Washington Gov. Jay Inslee signed legislation authorizing a new type of insurance plan in his state. Despite the “public option” mantra the state uses for the coverage, the bill specified that Washington’s exchange will contract with private insurers to provide the government plan. In Washington, as in Colorado’s proposal (not enacted) for a similar type of insurance offering, lawmakers did not want the state to bear the financial risk if the plan incurs financial losses.
That said, the legislation included the one main element of the “public option” envisioned by Biden and the left: government price controls on doctors and hospitals. The bill did include recommendations that bidding insurers may take to reduce overall health-care costs. Instead, its prime mechanism to lower spending came via caps on reimbursements to doctors and hospitals, linked to a percentage of Medicare payment levels.
Few Plans — And Higher Premiums
Notwithstanding the cudgel that these arbitrary price controls provide to insurers selling “public option” plans, the first-year offerings have proved underwhelming. For starters, insurers only applied to sell the plans in 19 counties. In more than half of Washington state’s counties — largely in the rural north and southwest — enrollees won’t have a “public option” at all.
More importantly, premiums for the “public option” plans in many cases exceed other offerings available on the state’s insurance exchange. In King County, home to Seattle and more than one-quarter of all Washington residents, UnitedHealthCare will sell the only “public option” plan.
The state notes that King County enrollees browsing the most popular type of exchange plan, and the one that determines Obamacare subsidy levels, will pay approximately 25 percent more if they select United’s “public option” plan over other available alternatives. In a neighboring county, a “public option” plan offered by BridgeSpan will cost a 40-year-old $125 more per month, or $1,500 more per year, than the lowest-premium option.
Overall, the 2021 premium results have not yielded the 5-10 percent premium reduction Washington had so hoped for. State Sen. David Frockt, a Democrat who sponsored the legislation creating the “public option” last year, conceded that “on the premium side, we’re not where we want to be.” Officials with the exchange claimed that the dual uncertainties of a new insurance product and the implications of COVID on health-care spending led insurers to price their offerings more conservatively.
Another explanation for this year’s higher premiums could portend spikes in future years. Specifically, the legislation creating the “public option” also established standardized benefit designs that the plans must follow. The standardized benefit designs include lower deductibles and cost-sharing requirements than other plans, meaning that “you get more bang for your buck” by enrolling in the “public option,” according to Michael Marchand, the exchange’s Chief Marketing Officer.
But providing richer benefits at a higher premium will only attract enrollees expected to use those benefits. For instance, it seems unlikely that many healthy individuals will pay an extra $125 per month to enroll in BridgeSpan’s “public option” offering. If these plans attract a disproportionate amount of older and sicker enrollees, premiums could rise further in 2022, or insurers could stop offering the “public option” altogether.
While most of the nation remains focused on post-election outcomes in the nation’s capital, the “other” Washington provides an important, albeit cautionary, lesson. Contra Biden and the left, preliminary indications from the Pacific Northwest’s experiment provide further confirmation that greater government control over health care doesn’t deliver its promised benefits.