Design Considerations

Design Considerations

Policymakers face many decisions in designing a public health insurance option — from how the program will be financed and administered, to whom is eligible, to whether the public option will compete on a level playing field with private health insurance plans. The choices policymakers will make may vary based on their policy goals for pursuing a public option and the model they would like to pursue.

These are just some of the most critical questions that policymakers must consider when designing a public option. Our team is available to support policymakers in considering these and other key questions.

  1. How will the public option be administered?

    Policymakers must decide how a public option will be administered. Key questions include:

    • Will the public option be built upon an existing federal program (such as Medicare or the Federal Employees Health Benefits Program) or a program with an administrative or regulatory role for states (such as Medicaid, CHIP, or marketplace coverage)?
    • Should certain public option functions be administered by private entities, such as private health insurers?
    • What entity will bear the financial risk and how will risk be pooled or shared?
  2. Who will be eligible?

    Policymakers must decide whether to make a public option available to a narrow or broad population. Key questions include:

    • Will the public option be limited to only the individual market — or more broadly available to employers and their employees?
    • Will the public option be limited to only those within a certain income bracket or geographic region (such as those living in highly concentrated health care markets)?
    • Will the public option be available to populations that do not currently qualify for existing public coverage programs or marketplace subsidies?
  3. What benefits will the public option cover?

    Policymakers must decide the benefit package that the public option will cover. Key questions include:

    • Will the benefit package align with, or exceed, standards for existing public and private coverage options, such as Medicare, Medicaid, private health insurance under the Affordable Care Act, or the Federal Employees Health Benefits Program? Will the benefit package include dental, vision, and hearing benefits, or coverage for support services, such as transportation?
    • Should the public option’s benefit package be used as a benchmark for other health coverage programs?
    • Will cost-sharing requirements align with, or exceed, federal standards for private health insurance under the Affordable Care Act (e.g., actuarial value)?
  4. How will the public option be financed?

    Policymakers must decide how a public option will be financed and who will pay what. Key questions include:

    • Will individuals and employers be required to pay or contribute to premiums and, if so, will premiums be uniform or allowed to vary (based on, say, geography or age)?
    • Will policymakers allow existing (or new) federal or state subsidies for private health insurance to be used for the purchase of the public option?
    • What other sources of funding will be available, both to cover start-up expenses and the costs if claims exceed premiums?
  5. How will payment rates be determined?

    Policymakers must decide whether — and, if so, how — to set payment rates for health care providers, facilities, and prescription drugs. Key questions include:

    • Will the public option establish a payment schedule (i.e., set specific rates for different services and providers), cap rates based on a percentage of Medicare (or other public) payment rates, or negotiate payment rates with providers and facilities?
    • Will the public option include any provider reimbursement protections such as payment floors for certain types of providers or facilities (such as critical access hospitals and primary care providers)?
    • Will the public option have the authority to negotiate prices for prescription drugs? What role, if any, will rebates play?
  6. Which and how many health care providers will participate?

    Policymakers must decide whether to require or incentivize health care providers to participate in the public option, and how widely such rules would apply. Key questions include:

    • Will providers participate in the public option as part of a network or on a traditional fee-for-service basis, as in Medicare?
    • Will the public option include incentives or requirements to ensure that the public option plan has sufficient provider participation so individuals across the country – including in rural and underserved areas — can access care?
    • Should the public option plan commit to a broader network of providers (which could ensure better access) or a narrower network (which could help drive down premiums and incentivize quality care)?
  7. How much state flexibility or variation will be allowed?

    Policymakers must decide what role states will play, if any, in administering and overseeing a public option plan. Key questions include:

    • Will federal policymakers give flexibility to state policymakers to establish, administer, or otherwise oversee a federally funded public option? If states decline to do so, will federal policymakers do so instead?
    • Will a public option be expected to comply with state-specific regulations (e.g., benefit mandates or rating rules) that apply to private health insurance and compete on a level playing field with private health insurance plans in the same market(s)?
  8. How can a public option advance equity?

    Policymakers can design a public option to reduce disparities in health and health care and advance equity. Key questions include:

    • Do representatives of communities of color and other higher-risk or underserved populations have a voice in the development and implementation of the public option?
    • Will the federal government pass on cost savings to lower-income consumers or otherwise reinvest these funds in initiatives designed to increase equity?
    • Will provider payment rates and network adequacy rules be designed to not only ensure but enhance access to safety-net providers and improve workforce diversity?
  9. How quickly should the public option be implemented?

    Policymakers must decide how quickly to implement a public option and weigh tradeoffs between swift implementation and potential disruption. Key questions include:

    •  Should the public option initially be phased in to certain populations, markets, or geographic regions, before opening up more widely?
    • How quickly, if at all, should changes to provider payment rates be phased in?

We Are Here to Help

Our goal is to help policymakers consider and understand public option proposals. Policymakers and staff can contact our team about a specific question or with a broader request for technical assistance. Our experts are available to review materials and consult on policy solutions.

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