Health insurance reform expert: Public option may not have ‘dramatic impact’ on uninsured rate but takes ‘noble approach’ in addressing costs
Progressives and public health advocates backing legislation to establish a state-managed public health insurance option in Nevada say it will boost health care affordability and accessibility.
Opponents, including the health care industry’s biggest names and local chambers of commerce, argue that a public option would lead to higher health care costs and threaten the state’s already fragile health care system.
Much of the public debate over the bill, SB420, so far has been simplified into sweeping statements like these, which are now being amplified by national organizations through ad campaigns targeted at everyday Nevadans. Supporters and opponents of the legislation have also released polls showing how politically popular or unpopular they believe the bill to be in an effort to persuade lawmakers to vote for or against the bill.
Less attention, however, has been paid to the bill’s fine print in an effort to understand what kind of effect it actually might have on the state’s health insurance landscape, provider network, uninsured population and the overall cost of health care.
At its core, the legislation would require insurers that bid to provide coverage to the state’s Medicaid population to also offer a public option plan. While the plans would resemble existing qualified health plans certified by the state’s health insurance exchange, the legislation would require them to be offered at a 5 percent markdown, with the goal of reducing the plans’ average premium costs by 15 percent over four years. The first year the public option plans would be offered is 2026.
The full impact of the bill likely won’t be known until the state conducts an actuarial study of the proposal. But, in the absence of such a study, The Nevada Independent took some time to talk last week with Sabrina Corlette, a research professor, founder and co-director of the Center on Health Insurance Reforms at Georgetown University, about the potential benefits and drawbacks of the legislation.
While her colleague, Katie Keith, gave a presentation on Nevada’s health care landscape during the bill’s hearing before the Senate Health and Human Services Committee last week, Corlette said she has not been involved with the bill and reviewed the legislation at the Independent’s request.
Corlette said that while she’s skeptical of the industry’s argument that creating a lower-cost public option will lead to cost-shifting elsewhere in the health care system, it’s difficult to know how negotiations between insurers and providers will play out. She also argued that if Nevada’s goal is reducing its uninsured rate, there may be other ways for it to “get a bigger bang for [its] buck.”
“The devil is very much in the details,” she said.
The bill passed out of the Senate Health and Human Services Committee on Tuesday on a party line vote. It will head next to the Senate Finance Committee to review the bill’s fiscal impact.
The below conversation has been lightly edited for length and clarity.
What were your first impressions reading the bill?
It is certainly within the public option rubric that I'm seeing being debated in other states. There's lots of different flavors of the public option, but, in terms of what I saw in the bill, this is consistent with what I'm seeing.
It's important to understand what the goals are, and I would say that times have changed because of the change here at the federal level and with the passage of the American Rescue Plan and these enhanced [federal] subsidies that help people who are up and down the income scale for marketplace plans. The state should certainly take that into account, and lawmakers and policymakers in the state should be — whatever they want to achieve — thinking about it in the context of the federal changes.
I do think that even with the federal subsidies, there is certainly merit in taking a look at premiums, the cost of care, what's driving the increases in premiums every year, and trying to address those cost drivers and bring down overall health care costs, not just for people in the [Affordable Care Act] marketplaces, but for small employers and large employers. I think everybody's struggling from high and rising health care costs.
What I'm trying to say is, if your goal is to reduce the number of uninsured in the state of Nevada, I am not sure that this bill is going to have a really dramatic impact. If your goal is to send a clear signal to health care providers who are — and I can't speak specifically to Nevada — but, when we look at what's driving increases in costs nationwide, it's hospital prices, it’s drug prices and it’s physician costs. So, if the goal is to reduce overall system costs, then I think this bill is taking a noble approach in terms of going where the costs in the system are, which is really on the provider side.
The devil is very much in the details, and we know we've learned from Washington state [home to the nation’s first state-based public option] and their experience that simply wishing something to be so doesn't always make it so.
My threshold question is: What's your goal? What are you trying to achieve? Again, if the goal is covering the uninsured, there may be more efficient ways and you can get a bigger bang for your buck with some other approaches.
Opponents of the bill have argued that Nevada should wait and see what impact the American Rescue Plan has on the health care landscape, while proponents argue that those changes are only temporary and the time for Nevada to take action is now. What merit do you see in those arguments?
It is absolutely correct that under the current federal law the federal enhanced subsidies expire at the end of 2022, but President Biden has proposed extending them, and I think there's fairly broad support, at least among Democrats in Congress, for extending them. Certainly nobody should be counting on them being extended, but I think there's a decent chance they will be. If you're a state policymaker, I think you have to think about a future in which these enhanced subsidies are available. Unfortunately, it requires you to have a plan A and plan B, because of the uncertainty, but it would be a mistake not to think about a future in which these subsidies will exist.
Up until this point, you had this weird dichotomy in the market where you have a group of people who are subsidized and insulated from any premium increases, and then a group of folks over 400 percent of the federal poverty line who feel every single dollar of those premium increases. They're totally exposed. The American Rescue Plan puts everybody into the subsidized camp, unless you're undocumented.
I do think it changes the risk-benefit analysis for state policymakers who are trying to think about what to do. I'm not making an argument not to try to address costs in the system. But part of this goes to the counterintuitive way in which the premium tax credits under the ACA work. What happens is the lower your premiums are in a given state, the less dollars you draw down from the federal government in premium tax credits. It's this kind of perverse consequence. You want people to try to reduce costs in the system but, with the premium tax credit, the more you reduce costs, the more you're reducing federal tax dollars coming into your state. From a fiscal perspective, that’s something to think about.
I want to be clear I'm not arguing against doing a public option. I'm not arguing against trying to rein in provider prices. I think those are all very noble things to do. A good chunk of the uninsured in Nevada are eligible for subsidies and are eligible for Medicaid. That’s maybe where you could get the biggest bang for your buck, if the goal is expanding coverage.
That's an argument opponents have been using against the legislation: Because more than half of the uninsured in Nevada are either eligible for Medicaid or subsidies, why is the state not instead focusing on those populations? Is it a both/and or an either/or?
It doesn’t have to be either/or. There’s a lot you can do to try to bring people who are eligible but uninsured into the system by increasing awareness and making it easier to get through systems. That does not preclude also doing a public option to try to lower overall health system costs. I don't know that it's necessarily either/or, you just have to define what your goals are.
Beyond the two groups eligible either for Medicaid or subsidies, there are two other buckets of people who are uninsured: Those for whom affordability or immigration status is a challenge. Thinking about that first bucket: Is reducing premiums costs enough to encourage those folks to purchase coverage?
It's hard to talk about this without thinking about the American Rescue Plan, too. We're seeing with the American Rescue Plan that when you reduce people's premiums — in this case through subsidies — people will sign up. So, if we're talking about a world where there's not these enhanced subsidies and you have a bunch of people who are unsubsidized, would lowering their premium by 15 percent bring some of them in the door? Yeah, I think so. I couldn't tell you how many — that would need to be studied by an actuarial analysis — but yeah, I think it should bring in some. The premium is the first number people look at and why so many of them say, “I just can't afford it.”
Will this bill help Nevada’s undocumented population?
If you’re low income, and you're not eligible for subsidies or for Medicaid, I'm not sure that a 15 percent reduction in the total premium is going to be something that you see as affordable. But I don't want to lump all undocumented immigrants into one category. If you have health issues, where you regularly need to see a doctor or you know you're going to need a surgical procedure — there's lots of reasons why you might purchase insurance, even if you feel like it's too expensive for your household budget — reducing the premiums for unsubsidized insurance could certainly help some of those folks. But if you’re at 100 percent of the poverty line, it's going to be a stretch no matter how much you reduce the premium,
Thinking a little bit about the cost side of things, this bill does have a 15 percent premium reduction goal and sets Medicare rates as the floor for negotiations with providers. The argument that opponents of the bill have been using is that this artificial pressure being created is going to lead to cost-shifting elsewhere in the system. Is there any merit to that argument?
I hear this one a lot. I’m a little bit of a skeptic on the cost-shifting argument. The empirical economic literature out there suggests it's way overblown. But, in general, what the economic analyses have shown is that even where provider prices are newly capped in one context, we're not seeing big jumps in prices in the commercial market. In general, the economic literature does not support that there's going to be widespread or serious cost-shifting. That said, I think it could have an effect. I think that's where you'd want some analysis to be done.
My sense in talking to insurance companies is that for their commercial products, they are typically negotiating with providers and hospital systems across all of their products. If you're talking about a United or Anthem, they're typically going to a major hospital system and they are negotiating prices for all of their commercial products. It's possible that if the state is saying prices have to come down for the public option that Anthem could use that as leverage in its negotiation to bring prices down across the board.
It's really hard to predict how some of those negotiations will play out. I could imagine Anthem saying to a major hospital system, “Look, if you don't want a massive shift of employers dropping their plans and shifting people to the individual market to these lower price plans, then you better work with me.” I can see dynamics where a price cap for the public option plan actually works to keep group commercial prices down. I can also see it going in the other direction. I just don’t know.
In Washington state, the plans couldn't really get providers to play. I think Nevada is trying to head that off at the pass by requiring participation.
Providers haven’t been happy about that provision, which requires them to participate in a public option plan if they also participate in Medicaid, the Public Employees' Benefits Program or workers’ compensation. They argue that the bill will create more instability within an already fragile provider network in Nevada. Are there real considerations to think about there?
I think it's something that could play out very differently in different parts of the state. You may have providers in Reno that really want to participate in the state employee plan because there are a lot of state employees in Reno, but there may be other parts of the state where the hospital sees one state employee every other week and may just tell the public option to pound sand. It's really hard to predict the effects, and I think it is a good idea for the state to be paying attention to those issues now and thinking about what combination of carrots and sticks will get the maximum provider participation and recognizing that there could be big differences across the state.
I wanted to also talk a little bit about the federal waivers the bill leans on. I know 1332 waivers have been used for reinsurance programs, but they haven't been used for a public option before. How do you see that playing out at the federal level?
If the state can show through actuarial studies that it is bringing down the cost of the premiums by 15 percent — as I mentioned, that will lower the amount of premium tax credits coming into the state — and if they get a waiver, the feds will essentially give them what they call the pass-through money. Whatever amount they should have gotten if they hadn't reduced premiums, they will get in this pass-through money.
What's nice about that is it could enable helping create a fund, for example, to help people with deductibles or other things where people have challenges with insurance. It's never been done before, but we have a new federal administration and I think there's a lot of openness to states pursuing these kinds of experiments now, so it's certainly worth a shot.
When Nevada first considered a public option, it was 2017, right after President Trump was inaugurated. There's a new political climate now, and President Biden has even talked about a national public option. How do you see Nevada’s public option fitting in with what’s happening at the federal level?
I doubt there will be a federal public option plan in the short term and, frankly, I think a lot of times the federal government looks to state for not just good health policy ideas but also evidence of what could work on a national level.
I would say that if Nevada wants to pursue a public option, it should move forward and if it works and it works well, it might become a model for a national program. But I think that is a long term thing. Certainly there's a lot of interest here at the federal level in the public option, and I think they would want to encourage states to move forward if they wanted to do so.