Public Option 101

Public Option 101

Rising health care costs have kept coverage out of reach for many, while increasingly straining the finances of families, employers, and state and federal programs. To help address these affordability challenges, policymakers are considering the adoption of a public health insurance option that could provide an alternative to traditional private health insurance plans.

Here, we answer the most common questions about public options and what policymakers need to know to better understand this issue.

Public Option 101

  1. What is a public health insurance option?

    There is currently no single, universal definition of a public option. The classic definition of a public option is a publicly funded, government-run insurance plan that directly competes with private health insurance coverage, with the goal of driving down premiums and underlying health care costs. However, policymakers and observers have more recently applied the term “public option” more broadly to include this and many other types of coverage arrangements.

    On this website, we define a “public option” broadly to include any government-administered or -initiated health plan intended to serve as an alternative choice to (rather than a replacement for) traditional private health insurance plans.

  2. What are the models for a public option?

    Public option proposals can vary considerably, but we have identified three major types of proposals under consideration by federal and state policymakers. These models are:

    • A wholly new publicly insured plan that directly competes with private health insurance coverage.
    • An option to buy into an existing public plan or program, such as Medicare, Medicaid, or a federal or state employee health plan.
    • A public-private partnership where the government requires or encourages private entities (like private health insurers) to offer an additional, more highly regulated plan for which the private entities bear the financial risk.

    Multiple states have enacted laws creating the third, public-private partnership model, while most federal proposals adopt either of the first two models. More information about each of these models is available here.

  3. Is there public support for a public option?

    Generally, yes. More than two-thirds of voters, including majorities of both parties, support creation of a public health insurance option. Other polls have similarly found broad support for universal coverage and certain forms of a public option, including allowing some people to “buy in” to Medicare and Medicaid. Public opinion could change as these policy proposals are better defined over time.

  4. Have states enacted a public option?

    Yes, three states — Washington, Nevada, and Colorado — have adopted public option-style laws. These laws vary in scope but reflect some similarities, such as relying on public-private partnerships with private insurers. CHIR experts compared these laws and provided an implementation update for The Commonwealth Fund. Additional discussions of these state laws are available in our resources.

  5. Has Congress passed a public option?

    No, federal policymakers have long considered and debated adoption of a public health insurance option but have not yet enacted such a proposal. Inclusion of a public option was, for instance, considered but not adopted during the debate over the Affordable Care Act in 2009 and 2010. But there has been renewed interest in recent years as members of Congress have introduced various proposals and the White House has called on Congress to move forward with a federal public option. Additional discussions of federal efforts are available in our resources.

  6. What do health care stakeholders say about public options?

    Consumers consistently cite the need to lower health care costs as a major priority, and doing so could help address chronic uninsured and underinsured rates. Health care industry stakeholders agree that health care costs are too high, and coverage should be more affordable for families and employers. But these stakeholders often disagree about the best path forward, and many industry stakeholders oppose adoption of a public option. In general, private health insurers do not want to compete against a public health insurance option, and health care providers are concerned that a public option would reduce revenue (by reducing the payment rates they receive for health care services relative to private health insurers).

  7. How much could a public option save?

    Estimates vary depending on how a public option would be structured, but one recent analysis from the Urban Institute estimated potential federal savings from a public option between $6 billion and 28 billion. A separate study by RAND similarly estimated federal savings in the range of $7 billion to $24 billion over four different scenarios. These estimates do not reflect additional savings that families and employers would see as a result of reduced premiums and household spending.

  8. Where can I learn more?

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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