A Framework for Public Option Implementation

A Framework for Public Option Implementation

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Designing a public option program will require states to address a range of issues, such as the administration and financing of the program as well as the design of its benefit package. Here we outline a series of questions and policy options for states to consider as they undertake the development of such a program. This policy decision tree is intended to provide states with a detailed blueprint for weighing the various factors and considerations involved with developing legislation authorizing a public option program and the ensuing regulatory implementation process.

The policy decision tree is designed around the following key assumptions:

• The state has executed an environmental scan of its current health insurance market, including the status of coverage (including portion of uninsured individuals), health care costs (including provider payment rates, premiums, and out-of-pocket costs), level of competition in the health care marketplace, and adequacy of provider networks;

• The state has cultivated an understanding of the underlying problems it seeks to resolve with the introduction of a public option program into the market; and

• The state has begun convening stakeholders and thought leaders to discuss the goals of the public option program and how it could be designed to address the identified challenges in the market.

Throughout this document, we reference efforts by Washington State and Colorado to establish a public option program because they are the leading examples of state initiatives in this arena. Although the prime sponsors of the Colorado Affordable Health Care Option Act withdrew their bill for the 2020 session in light of the coronavirus pandemic, the authorizing legislation, as well as the state’s process to collect feedback from stakeholders to inform the program’s design, offer lessons learned that may be helpful for other states.

The full framework can be downloaded here.

Model State Legislation for Authorizing a Public Option Program

Model State Legislation for Authorizing a Public Option Program

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The following is intended to serve as a template by which states can consider the key components of potential legislation to authorize a public option program. While there are many potential interpretations, we define a public option program as the introduction of a new form of health insurance coverage that presents an alternative to existing commercial plans and includes a stronger government role in oversight and administration, with the goal of expanding access to quality, affordable coverage.

We recognize that states will modify the language recommended here to better suit their particular policy goals, health insurance and health care markets, and the needs of their resident consumers.

Briefly, we recommend that the legislation address these following factors regarding a public option program:

• Advisory Board: The model legislation includes the authorization of an Advisory Board that would work alongside the [State Health Department] to design, implement, and operate the public option program.

• Carrier(s): Administration could be contracted out to commercial carriers operating in the state or issued by the state itself. If the plan will be administered by commercial carriers, states should specify whether public option plans will be issued by one health insurance carrier or multiple carriers.

• Impacted Markets: States should specify in which insurance markets the public option will be available.

• Reimbursement Rates: States should determine how providers and suppliers should be reimbursed by the public option plan(s).  

• Provider and Carrier Participation: States should consider the degree to which they will require or incentivize providers, insurance carriers, and drug and device manufacturers to participate in the public option program.

• Program Financing: The template includes a section for states to consider any financing mechanisms that may be required to fund the public option program’s operations, including both administration costs and potential new subsidies or other benefits furnished to consumers.

The model legislation can be download here.

With Support from Arnold Ventures

Model Legislation Overview: State Public Option Program

Model Legislation Overview: State Public Option Program

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I.  Introduction

While it may not be necessary in all cases, states may seek to establish a public option program through legislation. We define a public option program as the introduction of a new form of health insurance coverage that presents an alternative to existing commercial plans and includes a stronger government role in oversight and administration, with the goal of expanding access to quality, affordable coverage.

Here we outline a framework to guide states on establishing the legal authority to create a state public option program. The companion document to this – the model legislative text itself – is what states could use to begin crafting their own bills, which they may modify based on particular design preferences.

II.  Section Summaries

Section 1 – Legislative Declaration: The Model Legislation first outlines the goals and purpose of establishing a state public option program. The language includes a declaration of intent to establish an affordable health care option to increase access to health care coverage by offering a statewide plan for consumers in the individual market and/or the employer market.

Section 2 – Definitions: The Model Legislation also establishes working definitions for key terms used throughout the text, such as hospital, Medicare reimbursement rates, rebates, health system, etc. Existing state-specific definitions of these terms should be considered as legislation is drafted.

Section 3 – Public Option Program Advisory Board: The Model Legislation establishes an advisory board for the purposes of making recommendations to develop, implement, and operate the state’s public option program. The section delineates how members of the board are chosen; the number of members on the board; the roles of the executive director; the proportion of industry, consumer, and health care representatives that must sit on the board; what qualifications or skills board members should generally possess; under what circumstances board members would be removed; how to fill vacancies; how the board produces and communicates recommendations to policymakers and public option plan officials, etc.

Section 4 – Establishing the Public Option Plan and Requirements: This section defines the parameters of how the state’s pubic option plan must operate. Elements in this section include:

• The launch date for the program;

• Details on plan administration (i.e., is the plan state-run; does the state contract plan administration to a commercial insurance carrier; will multiple commercial insurers participate, etc.)

• Benefit requirements, including any plan standardization requirements for health issuers if the state intends to implement a multi-plan public option program;

• Other elements that the public option program must consider in designing the plan, including elements of value-based purchasing, value-based insurance design, addressing health disparities, care coordination, interoperability, etc.

• MLR requirements;

• How a plan will establish premiums, cost-sharing amounts, deductibles, and other co-insurance as necessary (including, e.g., services covered at no cost-sharing such as primary care services); and

• Drug rebate requirements, including how a carrier must lower plan premiums in accordance with rebate amounts received.

Section 5 – Health Care Provider Reimbursement and Participation: This section determines the rate at which the public option program will reimburse providers for covered services. It also includes provisions that would require providers in the state to participate in the public option program.

Section 6 – Program Financing: This section outlines how a state will finance the public option program. Many possible financing options exist and depend largely on the state’s particular financial conditions. Optional financing mechanisms included in the section are:

• Establishing new health care taxes or fees earmarked for funding the public option program;

• Increasing existing taxes (e.g., sales taxes);

• Redirecting savings generated in other state programs through the introduction of a public option, especially if done in conjunction with a Section 1332 waiver; and

• Allocating a portion of the general fund to the public option program through the budgetary process, which could include reducing state funding for other programs if appropriate.

Section 7 – Evaluation Reports: This section requires that the state conduct a third-party evaluation of the public option program to determine its impacts on the state’s health care market. The section includes details such as the frequency at which the state must conduct such evaluations and what features of the market the evaluations will examine (e.g., effects on premiums; consumer affordability; insurer competition in the individual market; provider network adequacy; etc.).

With Support From Arnold Ventures

Model Stakeholder Engagement Strategy

Model Stakeholder Engagement Strategy

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Securing the legal authority to establish a public option program at the state level requires the deployment of a multifaceted stakeholder engagement strategy. Here we describe an approach to engage stakeholders and advocate for a public option. Developing and nurturing strong partnerships with stakeholders and state legislators (ideally bipartisan and bicameral, where feasible) early in the process will help lead to early buy-in, consensus around the design of a public option program, and establishment of long-term support for the program.

This document is intended for state policymakers, including both state legislators and state government officials, as well as advocates at the state level. The primary target audience of advocacy is the state legislature since they will make the decisions that shape the authority to establish the public option program. Stakeholder engagement may vary based on state dynamics (e.g., political control of state legislature and executive branch), as well as the policy design of the public option program (e.g., whether hospital and/or insurance carrier participation is mandatory or optional).

This strategy should be employed in tandem with the process of developing, implementing, and evaluating the public option program. See our model process and timeline for state public option implementation.

Approach

1. Define the goals of the engagement: Generally, the goal of the engagement is to secure the state legal authority to create a public option program. Central to this goal is the development of authorizing legislation that advances the purpose of the public option program and addresses to the fullest extent possible the concerns of stakeholders, since they will serve a critical role in the advocacy and ultimate passage of the legislation.

2. Identify key stakeholders: Given that the public option program is likely to shake up the health care system, engaging a diverse group of stakeholders, representing different – and even conflicting – interests early in the process will help improve the likelihood of securing state legal authority and subsequently implementing a public option program. Collaborating with existing coalitions with aligned goals could help facilitate the formation of partnerships and the dissemination of information.

Certain stakeholders will adamantly oppose pursuit of the public option program and may actively attempt to block such reform. Still, efforts to involve these stakeholders, particularly during the phase of conceptualizing and designing the public option program (see Phase 1 in the model process and timeline) may help mitigate challenges in moving the legislation through the legislative process (see Phase 2). In addition, engaging federal officials from the Centers for Medicare and Medicaid Services (CMS) may be particularly helpful if the state intends to pursue a federal waiver as part of its public option program.

The necessary stakeholders may include the following:

• Health Care Industry: Insurance carriers, hospitals, physician groups, professional associations, and health insurance brokers

• Consumers: Potential enrollees, employers, patient advocacy groups, and trade associations

• Policymakers and Government Officials: State legislators (ideally bipartisan and bicameral and preferably legislators who sit on committees with jurisdiction over health insurance reform), governor’s office, government agencies with jurisdiction over health insurance reform, and CMS (including the Center for Consumer Information and Insurance Oversight (CCIIO) and the Center for Medicare and Medicaid Innovation (CMMI))

In addition to convening stakeholders representing various health care-related interests, seeking individuals and groups with diverse backgrounds and life experiences and from different parts of the state can help enrich the discussion and promote health equity.

3.  Establish a structure for collecting input and feedback: Setting up mechanisms to collect input and feedback will help keep stakeholders engaged at all stages of the legislation development process. Soliciting public comments in response to a request for information can facilitate the collection of feedback in a relatively organized manner for specific purposes (e.g., on desired elements and considerations for a public option program, draft public option program proposal). Creating a process for the lead state agencies to respond to comments, providing rationale as to why specific recommendations or considerations were or were not incorporated could help promote transparency throughout development.

Additionally, providing opportunities for real-time two-way communication (e.g., listening sessions) can help encourage dialogue and further transparency. When planning listening sessions or other town hall-style meetings, consider ways to make the meeting as accessible as possible to encourage participation. Considerations include holding in-person meetings (if safe to do so) in multiple counties throughout the state, offering individuals the option to virtually participate in meetings, and convening meetings at different times to account for varying work schedules and other obligations.

For example, throughout the public option development process, Colorado convened 20 listening sessions across the state, conducted focus groups, and considered over 260 comment letters on the draft and final proposals for a public option. Similarly, Washington State held a public comment period during the fall of 2019 on the standard plans and convenes regular public meetings for stakeholders to engage on policy and design considerations.

4. Advocate for legislation authorizing the creation of a public option program: Engaging stakeholders from the outset will culminate in a range of advocacy activities aimed at building political support in the state legislature behind the desired public option program. Below are suggested advocacy strategies:

• Pursue the support of state legislators with a track record (based on voting record and public statements) of supporting health care reforms aligned with the goals of the public option program as well as state legislators that are members of key committees with authority over health insurance reform.

• Mobilize stakeholders to advocate on behalf of the public option program by meeting with state legislators, holding briefings to educate state legislators and their staff, testifying at hearings before key committees, and raising public awareness about the program (e.g., op-eds, advertising campaigns, town halls)

• Develop materials with clear, concise, and actionable messages to enhance advocacy activities. Examples include fact sheets tailored to different audiences (e.g., state legislators, other stakeholders) and letters of support from stakeholders and legislators (e.g., “Dear Colleague” letter)

• Gauge support for a public option program through polling, message testing, and focus groups

• Anticipate and prepare for counterarguments from the opposition by identifying individuals and organizations that would attempt to block the legislation and developing talking points to bolster the rationale for a public option program

The following chat reflects concerns that were raised by stakeholders during the development of the public option programs in Washington State and Colorado.

With the support of Arnold Ventures

Model Process and Timeline for State Public Option Implementation

Model Process and Timeline for State Public Option Implementation

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Standing up a public option program at the state level is a resource- and time-intensive process, requiring stakeholder buy-in and political capital. Here we outline the anticipated timeline and iterative process for a state to institute a public option program from conceptualization to deployment and evaluation. While the steps are presented in a linear fashion, certain steps may need to be repeated or implemented simultaneously.

This document is intended for state policymakers, including both state legislators and state government officials. Given the variation in state political landscapes and policy priorities, the document is not intended to be one-size-fits-all. Instead, the document offers a model process and timeline that can be molded to fit a state’s needs. Timelines may vary widely due to legislative calendars, political dynamics, and other state-specific factors. 

Of note, a multifaceted stakeholder engagement strategy should be employed in tandem with the process of developing, implementing, and evaluating the public option program. Establishing and nurturing strong partnerships with stakeholders and state legislators (ideally bipartisan and bicameral, where feasible) early in the process, particularly before state legal authority is pursued, would likely bode well for passing the intended legislation. A forthcoming model stakeholder engagement strategy will be available here.

Model Timeline  

This chart summarizes each phase of the process and notes timing, which may vary by state, for each step (i.e., target date, duration). A more detailed description of each step is provided further below this introductory overview.

Model Process

Phase 1: Conceptualization and Design

1.       Conduct an environmental scan to provide an overview of metrics and indicators to help take stock of the current insurance market and potential impact of a public option program. They include, but are not limited to:

• Health insurance coverage (across employer-sponsored insurance, individual health insurance, Medicaid/CHIP, Medicare, uninsured);

• Enrollment in the individual market, including a breakdown of individuals receiving premium tax credits or cost-sharing reductions;

• Trends in health care spending, including premiums and cost-sharing (across households by income group; employers; state government, federal government; and hospitals);

• Competition in the health care marketplace;

• Provider network adequacy;

• Actuarial analysis to determine target reimbursement, impact on subsidized population, and enrollment changes across markets;

• Potential impact of the public option program on enrollment, premiums, premium tax credits, and federal-pass through savings; and

• Expected hospitals reimbursement rates.

The environmental scan is intended to identify the underlying problem and aid in the development of a draft problem statement. If necessary, the state may have to pursue legal authority and/or funding to conduct an environmental scan.

2.       Convene stakeholders and thought leaders to collect feedback on the draft problem statement, amending it, if necessary, as well as to discuss how a public option program could be designed to address the identified problem. The discussion should focus on establishing the goals of the public option program. Engaging a diverse group of stakeholders, representing different – and even conflicting – interests (e.g., insurance carriers, providers, consumers, employers, brokers, advocates, and potential state legislation sponsors) early in the process will help facilitate successful implementation of a public option program. In addition, engaging federal officials from the Centers for Medicare and Medicaid Services (CMS) may be particularly helpful if the state intends to pursue a federal waiver.

3.       Complete the public option decision tree to guide the design of a draft public option program proposal. This exercise is intended to provide the state with a detailed blueprint to develop legislation authorizing the public option program, as well as help navigate the regulatory decision-making process.

4.       Engage the public through listening sessions and public comment opportunities to solicit feedback on the draft public option program proposal. Public listening sessions should be conducted across the state. Creating a process for the lead state agencies to respond to comments, providing rationale as to why specific recommendations or considerations were or were not incorporated would help promote transparency throughout development. The output of this iterative process should be a more fully fleshed out public option program proposal that reflects stakeholder feedback.

Phase 2: Pursuing Legal Authority

5.       Draft legislative text based on the public option program proposal. While the public option decision tree is intended to resolve a bulk of the policy decisions, this step may pose new questions or require specific policy decisions to be revisited. Therefore, the development of legislation should be a collaborative process, involving the state legislators who would sponsor the bill (ideally bipartisan and bicameral); the state agency(s) who would be responsible for implementing the bill; and stakeholders who would be affected by the bill (particularly  stakeholders who were engaged during the first phase). Crafting the bill in a collective and transparent manner would help minimize pushback, as well as reduce the likelihood of significant changes to the legislation (in the form of amendments) as it moves through the legislative process. The goal of this phase is to secure the state legal authority to create a public option program and codify core design elements.

6.       Collect feedback on draft legislation from other state legislators, constituents, and federal officials. A formal process for constituents to submit comments (like the process used in the first phase) would further underscore the collaborative and transparent approach to crafting legislation. In addition, this process should include an opportunity for lead sponsors to respond to feedback, providing rationale as to why specific recommendations or considerations were or were not incorporated.

7.       Lead sponsors introduce legislation to the state legislature. Accompany the formal introduction of the bill with a public awareness campaign (including a suite of plain language materials that explain how the legislation would affect consumers, providers, and insurance carriers) as well as outreach events to help increase understanding and build support among the public.

8.       Committees of jurisdiction convene hearings to examine the legislation and hold markups. The hearings would provide another opportunity for the lead sponsors to collect feedback and build support for the bill. In addition, the hearings would likely provide opponents (including state legislators and stakeholders) an opportunity to publicly criticize the public option program. The state and its allies should be prepared with counterarguments to bolster the argument for a public option program. As noted earlier, the state and its allies would need to continue its robust advocacy strategy, including individual outreach to Committee members, to ensure the bill is favorably reported to the chamber.

9.       Each chamber passes legislation and Governor signs legislation into law. Throughout this step, the state and its allies would need to continue its robust advocacy strategy, including individual outreach to Committee members, to ensure the bill is passed by each chamber and sent to the Governor’s desk for signature.

Phase 3: Deployment

10.   Implement state law through the rulemaking process, which would include opportunities for public comments. This process typically consists of four stages: (1) notice to the public about proposed rulemaking; (2) opportunity for public comment; (3) public hearing; and (4) final adoption of the rule. While the state law authorizing the creation of a public option program would determine the program’s major components and guardrails, state regulations would be needed to establish more specific requirements and aspects of the program. For example, the state may be required to issue rules that establish the conditions of participation for providers and insurance carriers. These conditions could include requiring insurance carrier participation through a penalty process or developing a hospital reimbursement formula.

11.   Pursue federal waiver application process if desired for additional flexibility or federal pass-through funding. For the purposes of designing and implementing a public option program, a state may leverage the following three authorities for added flexibility: (1) State Innovation Waivers under Section 1332 of the Affordable Care Act (ACA) through which states may alter requirements in individual and small group insurance markets and receive pass-through funding; (2) the delivery and payment reform models for Medicare and Medicaid conducted by the Center for Medicare & Medicaid Innovation (CMMI), as authorized under ACA Section 3021; and (3) waivers under Section 1115 of the Social Security Act that allow states to test and evaluate state-specific policy changes in Medicaid and the Children’s Health Insurance Program (CHIP).

Pursuing a federal waiver typically entails gathering data (publicly available data and/or data requested from insurers) and conducting an actuarial and economic analysis – all of which may require considerable preparation and time. Prior to submitting a completed federal waiver, a state would be required to provide the public with an opportunity to comment on the application through a formal public comment process (30 days minimum and two public hearings). CMS would be available to provide technical assistance on the application to help ensure approval. A state is encouraged to explore federal waivers when completing the policy decision tree (see Phase 1).

12.   Procure insurance carriers that will offer public option plans on the individual market (if applicable). This step would be required if the state decides that a private insurance carrier, rather than a state agency, will issue the public option plans. If so, the state would issue a request for application (RFA) for carriers interested in offering public option plans on the individual market.

13.   Insurance carriers submit standard bids and rate filings. Depending on state policy, rate filings are submitted to either the state or Federal government for approval to participate in a State-based Exchange (SBE) or a Federally-facilitated Marketplace (FFM), respectively. Insurance carriers seeking to participate in an FFM would be required to obtain Qualified Health Plan certification.  

14.   Announce availability of public option plans. The public announcement should detail which carriers were selected to offer public option plans and provide information on premiums and other cost-sharing for each plan. The information should be presented in a way that allows consumers to compare benefits and out-of-pocket costs across different plans (including public option plans and non-public option plans). The announcement should be accompanied by an outreach campaign to increase public awareness. In addition, collaborating with navigator organizations that received federal funding for enrollment, outreach, and public education activities to help increase understanding about the public option plans could help facilitate enrollment in the public option plan.

15.   Participate in the Open Enrollment Period. Eligible residents will be able to enroll in the public option plan offered on either the SBE or FFM. While the open enrollment period for an FFM is November 1 through December 15, states with SBEs have the flexibility to set their own open enrollment period dates. If the public option is pursued through a Medicaid expansion waiver, eligible residents can apply for Medicaid benefits beginning January 1. 

16.   Coverage start date. Coverage offered through the public option plans would be effective. The state should continue to monitor implementation of the public option program (See Phase 4).

Phase 4: Evaluation

17.   Evaluate the impact of the public option program on health insurance coverage, health care spending, competition in the health care marketplace, and other quality and affordability metrics – particularly those measured in the initial environmental scan. These metrics should be compared to metrics collected as part of the environmental scan (i.e., pre-public option) as well as national-level metrics. Regarding timing, metrics should be collected and analyzed on a regular basis (weekly or monthly). A formal and actionable evaluation should be conducted after enough time has passed (potentially three months). It should be completed in time to allow the state to make program adjustments and allow insurance carriers to modify their public option plans, if necessary, before approval must be obtained to participate in an SBE or FFM. Specific timing depends on the design of the public option program and/or duration of the contract with insurance carriers. In addition, a state may be required to evaluate implementation of its federal waiver, if approved. Evaluation results should be released in a public report.

18.   Solicit feedback from the public and stakeholders. Like in Phase 1, public listening sessions should be conducted across the state and open to a diverse group of stakeholders, including individuals and entities directly affected by the public option plan (e.g., public option plan enrollees, insurance carriers offering public option plans, providers participating in the public option plan).

19. Incorporate feedback into the design of the public option program in forthcoming years. The state can make changes to the public option program two main avenues. The state can modify the program through the rulemaking process. However, the scope of these changes would be limited to what is allowed under current law (see Step 11).  Alternatively, the state could make more significant changes to the program by pursuing new legal authorities (see Phase 2). When contemplating changes to the public option program, the state should consider timing (e.g., how long will it take for the change to take effects) and potential obstacles to making those changes. For example, pursuing new legal authorities should ideally be pursued if the proposed change is politically viable.

With the Support of Arnold Ventures