Massachusetts: Public Option Program
Upshot
Democratic state legislators introduced for the second time a bill to establish a public option program in Massachusetts, S. 787, though the bill was not ultimately passed. This suggests continued interest among Democrats in advancing these policies in Massachusetts.
The program would require the state to establish its own health insurance plan to be offered on the Marketplace for the individual and small group markets. It would include certain features to ensure consumer affordability and would not require providers to participate.
Massachusetts operates a competitive individual market with robust plan participation and consumer affordability features already. Massachusetts is progressive on its reform agenda and has introduced other health insurance coverage reforms, such as legislation to establish a single payer system.
Background
Massachusetts has long been a leader in state-level health care reform. In terms of its individual market, it operates a state-based health insurance Marketplace called Health Connector. Massachusetts’ Marketplace has remained among the most competitive in the country, with eight carriers operating on the Marketplace in 2022.
Additional details of the state’s Marketplace include:
Massachusetts offers a ConnectorCare program for individuals up to 300 percent FPL which provides additional state subsidies to lower-cost silver tier plans on top of existing federal subsidies.
The state features a state-level individual mandate that requires all residents to carry health insurance or otherwise pay a state tax penalty.
To further enhance the risk pool, the Massachusetts operates a “merged market” (i.e., an arrangement in which the individual and small group markets are combined under one market), which keeps non-group market premiums relatively stable by including small group lives in the same shared risk pool.
Massachusetts standardizes plan benefit offerings in the Marketplace to facilitate an “apples-to-apples” comparison for consumers shopping for coverage.
Marketplace average benchmark premiums have consistently been among the lowest since 2014, though have risen in recent years. Average per member per month premiums – which accounts for plans across all metal tiers and not just silver-tier plans – were the lowest in the nation in Massachusetts in 2017 and 2018.
Summary
The bill would establish a public option program in Massachusetts. This means that the state would be required to establish its own health insurance plan to be offered alongside other commercial plans in the individual and small group markets, as well as eventually in the large group market. Additional details follow.
Contracted plans: The state would initially be authorized (though not required) to contract with Medicaid managed care organizations to administer the public option program. Eventually, the state would be permitted to contract with non-Medicaid managed care organizations.
Premiums: The state would establish premium rates for the public option program. Rates would have to be sufficient to cover the costs of the health benefits provided by the public option as well as the administrative costs related to operating the public option.
Payment rates: Payment rates for covered services would be based on provider payments under Medicare Parts A and B. The state would have leeway to determine the extent to which the base Medicare rates should be adjusted to reimburse providers and medical device manufacturers.
Provider participation: Medicare participating providers would participate in the public option program by default. However, the state would establish an opt-out process for providers who do not wish to participate. Providers who do opt out would not face any penalty and would have the opportunity to opt back in if they so choose. The state would establish a process for all providers to participate in the program if they so choose.
Risk adjustment: Risk adjustment is how payers estimate the cost of insuring a patient population based on their projected costs due to underlying risk factors (e.g., age, level of disease, etc.). The state would be required to assess the average “actuarial risk” of all enrollees (i.e., an estimate for how expensive it would be to insure the average enrollee). Self-insured group health plans would be exempted from this analysis. The state would then compare the actuarial risk of each health plan’s enrollees against the average actuarial risk of all enrollees. For health plans whose enrollees have an actuarial risk that is higher than the average actuarial risk of all enrollees in all plans for a year, the state would provide a payment to those plans based on a calculation to be determined by the insurance commissioner.
The bill would also establish a “Public Health Insurance Option Trust Fund,” which would have funding credited to it for operation of the public option program. The bill did not specify the revenue source for the trust fund.