Colorado vs. Washington: Public Option or Not?

[Greenbeard]

The debate in Colorado (halted last year due to the pandemic) over whether to become the second state to launch a state-level public option is heating up again. The opponents started their opening volley earlier this month:

Nonprofit launches $1 million TV ad buy against Colorado Democrats’ public health insurance option proposal

A deep-pocketed nonprofit backed by private insurance companies has launched a barrage of advertising aimed at building public opposition to Colorado Democrats’ attempt to create a public health insurance option.

Partnership for America’s Health Care Future launched a TV ad buy at a cost of nearly $1 million on Monday that will run through early April. The ads are airing in the Denver, Grand Junction and Colorado Springs television markets.

And that’s just the beginning of the group’s full-court press against a bill that still hasn’t been introduced.

One local think tank is keying-in on the somewhat underwhelming returns from the first year of Washington state's experiment with a public option to argue that Colorado's current approach to keeping down premiums (reinsurance, which takes some medical expenses out of premiums and reimburses for them separately) is better:

Recent Trends in Health Insurance Costs: Early Results of Public Option in Washington State Compared to Colorado

For the 2021 plan year, while both Colorado and Washington State have more affordable premiums than the country as a whole, average benchmark premiums in the ACA marketplace are 9.5% lower in Colorado than Washington State.

Over a longer time-period, Colorado has also seen larger reductions on a percentage basis in ACA average benchmark premiums. Since 2018, Colorado benchmark premiums have fallen by 25.3%, compared to 15.5% increase in Washington State. Across the nation, ACA average benchmark premiums have fallen by 6.0%.

In most of the counties where a public option was offered in Washington State, public option premiums were more costly than other plans.

Reinsurance is indeed good and more state marketplaces should be using it. Every state that has implemented it under the ACA saw double digit premium decreases as they reset premiums downward--Colorado effectively erased the 2017-18 Trump Bump when it implemented reinsurance in 2020. But prior to that, Colorado's marketplace premiums closely tracked the national numbers, whereas Washington (which doesn't have reinsurance) has tended to have lower premiums than the national average almost from the start.

And reinsurance removes some costs from premiums but doesn't eliminate them, meaning Colorado's premiums (by design) don't reflect the full cost of care. Reinsurance is good for the functioning of the insurance market in that it doesn't allow the expenses of the highest cost enrollees to price out healthier shoppers, but it doesn't tackle the underlying prices of the care being purchased.

For example, the prices paid to hospitals by employer-sponsored health plans in Colorado appear to be 15-20% higher, using local Medicare prices as a measuring stick, than prices in Washington. And indeed the high margins enjoyed by Colorado's hospitals are a key impetus for the public option push there: Colorado hospitals’ profit margins are nation’s highest as state lawmakers move to cap health care costs.

Just pursuing reinsurance won't tackle that. Given that reinsurance and a public option aren't mutually exclusive (in fact, they might be great complements), this whole line of argument seems like a bit of a red herring. That said, it's hard to imagine that Washington's public option experiment, three months in, won't become a talking point going forward. This one will be interesting to watch!

 

[Neomalthusian]

The debate in Colorado (halted last year due to the pandemic) over whether to become the second state to launch a state-level public option is heating up again. The opponents started their opening volley earlier this month:

Nonprofit launches $1 million TV ad buy against Colorado Democrats’ public health insurance option proposal


One local think tank is keying-in on the somewhat underwhelming returns from the first year of Washington state's experiment with a public option to argue that Colorado's current approach to keeping down premiums (reinsurance, which takes some medical expenses out of premiums and reimburses for them separately) is better:

Recent Trends in Health Insurance Costs: Early Results of Public Option in Washington State Compared to Colorado

Reinsurance is indeed good and more state marketplaces should be using it. Every state that has implemented it under the ACA saw double digit premium decreases as they reset premiums downward--Colorado effectively erased the 2017-18 Trump Bump when it implemented reinsurance in 2020. But prior to that, Colorado's marketplace premiums closely tracked the national numbers, whereas Washington (which doesn't have reinsurance) has tended to have lower premiums than the national average almost from the start.

And reinsurance removes some costs from premiums but doesn't eliminate them, meaning Colorado's premiums (by design) don't reflect the full cost of care. Reinsurance is good for the functioning of the insurance market in that it doesn't allow the expenses of the highest cost enrollees to price out healthier shoppers, but it doesn't tackle the underlying prices of the care being purchased.

For example, the prices paid to hospitals by employer-sponsored health plans in Colorado appear to be 15-20% higher, using local Medicare prices as a measuring stick, than prices in Washington. And indeed the high margins enjoyed by Colorado's hospitals are a key impetus for the public option push there: Colorado hospitals’ profit margins are nation’s highest as state lawmakers move to cap health care costs.

Just pursuing reinsurance won't tackle that. Given that reinsurance and a public option aren't mutually exclusive (in fact, they might be great complements), this whole line of argument seems like a bit of a red herring. That said, it's hard to imagine that Washington's public option experiment, three months in, won't become a talking point going forward. This one will be interesting to watch!

Reinsurance is a little hard for me to understand, being financed by fees on insurance carriers and hospitals. I can see how it could drop ACA premiums but the money’s still gotta come from somewhere right?

 

[NWRatCon]

.... Reinsurance is indeed good and more state marketplaces should be using it. Every state that has implemented it under the ACA saw double digit premium decreases as they reset premiums downward--Colorado effectively erased the 2017-18 Trump Bump when it implemented reinsurance in 2020. But prior to that, Colorado's marketplace premiums closely tracked the national numbers, whereas Washington (which doesn't have reinsurance) has tended to have lower premiums than the national average almost from the start.

And reinsurance removes some costs from premiums but doesn't eliminate them, meaning Colorado's premiums (by design) don't reflect the full cost of care. Reinsurance is good for the functioning of the insurance market in that it doesn't allow the expenses of the highest cost enrollees to price out healthier shoppers, but it doesn't tackle the underlying prices of the care being purchased.
....
Just pursuing reinsurance won't tackle that. Given that reinsurance and a public option aren't mutually exclusive (in fact, they might be great complements), this whole line of argument seems like a bit of a red herring. That said, it's hard to imagine that Washington's public option experiment, three months in, won't become a talking point going forward. This one will be interesting to watch!

BLUF: Public Option is the only realistic remedy for lack of rural healthcare. It's really that simple. Moreover, once Public Option is on the table, rates drop (over time) dramatically. Reinsurance is the best way to balance healthcare costs across the marketplace by reducing risk. (Full disclosure: My father worked for one of the largest reinsurance providers in the country (at the time) - it has since been acquired by an international). The major difference between markets is the ability to reduce capital/loss reserves maintained by insurance carriers, most of which are mandated by State laws.

 

[Greenbeard]

Reinsurance is a little hard for me to understand, being financed by fees on insurance carriers and hospitals. I can see how it could drop ACA premiums but the money’s still gotta come from somewhere right?

In some sense, they’re playing off the ACA market/much larger group market disparity here. Colorado hospitals are notoriously overpaid (i.e., in terms of margins relative to the rest of the country) and both hospitals and insurers are “penalized” here (to the benefit of individual market insureds) for allowing it to be so.

 

[Wayne Jr]

The debate in Colorado (halted last year due to the pandemic) over whether to become the second state to launch a state-level public option is heating up again.

It has to be everyone and it has to be compulsory or it won't work because low-risk high-earners won't voluntarily pay for high-risk low-earners out of simple self-interest (not to be confused with selfishness).

 

[Greenbeard]

It has to be everyone and it has to be compulsory or it won't work because low-risk high-earners won't voluntarily pay for high-risk low-earners out of simple self-interest (not to be confused with selfishness).

The risk of the individual isn’t what determines premiums in a community-rated market, it’s the risk of the enrolled population. And the ACA risk adjusts, such that insurers with healthier enrolled populations pay those with less healthy enrolled populations (thus lowering the premiums of the latter).

Plus, there’s no such thing as a compulsory public option.

 

[Wayne Jr]

The risk of the individual isn’t what determines premiums in a community-rated market, it’s the risk of the enrolled population. And the ACA risk adjusts, such that insurers with healthier enrolled populations pay those with less healthy enrolled populations (thus lowering the premiums of the latter).

Not relevant to what I said.

Plus, there’s no such thing as a compulsory public option.

That's the fact which should have told you that I am not supporting Colorado's proposed program, but single-payer. It needs to be a federal single-payer or it won't work and is a complete waste of time and money.

 

[Greenbeard]

Not relevant to what I said.

Very relevant! Low-risk high-earners will choose the plan with their desired attributes that offers the most competitive premium.

That's the fact which should have told you that I am not supporting Colorado's proposed program, but single-payer. It needs to be a federal single-payer or it won't work and is a complete waste of time and money.

Single-payer failed at the polls in Colorado 79-21, so we are where we are.