Model Legislation Overview: State Public Option Program
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.).