Governors Steve Sisolak and Jared Polis signed their states’ respective “public option” bills into law this week, making Nevada and Colorado the second and third states to institute a public option. While proponents of each measure are calling these public-option laws, it is important to note that these laws do not institute pure public options. Since these new laws use the private market to offer standardized plans, health insurance brokers will still play a major role in the marketplaces of Colorado and Nevada.

A pure public option bypasses private insurers and allows residents to obtain health coverage directly from the government. This sort of proposal is exceptionally dangerous, with potential to destabilize the health insurance market, put small rural hospitals out of business and more. A report by FTI Consulting found a state government option in Colorado could financially impact 78 percent of all hospitals, totaling $112 million in losses annually, and threaten access to care for Coloradans, especially members of racial and ethnic minority communities. Another study from the Common Sense Institute concluded that a pure public option posed “serious consequences for Colorado’s healthcare sector and the employer-sponsored health plans where most Coloradans obtain healthcare coverage.”

While Centennial State Democrats are still calling this a public option, it is certainly worth noting the fundamental changes the bill underwent prior to passage in order to avoid confusion. HB 1232, as signed into law, does not institute this pure public option, but instead institutes a standardized public-private plan to be offered through private carriers alongside ACA plans and to be made available in every county. This iteration of the bill is in stark contrast to the bill that was initially introduced, which would have allowed Coloradoans to opt into public coverage provided directly by the state government, rather than through a private carrier. The previous proposal also established more intense timeframes to lower costs: For the 2023 plan year, carriers would have needed to offer standardized plans in individual and small-group markets at a price at least 10 percent less than the rate they offered on other individual-market plans in 2021, and if premiums were not brought down by 20 percent by the 2024 plan year, the “pure” public option would go into effect.

In the iteration of Colorado’s HB 1232 that passed, the timeframe has been tamed to a 15-percent reduction over three years with no threat of a genuine public option if carriers fail. Another provision present in the original bill but absent in this iteration would have fined healthcare providers for not accepting the plan. However, the insurance commissioner will have the ability to compel providers to accept the plan if there are not enough plan options per county. The commissioner will also have the ability to set prices for the services offered by doctors and hospitals under the standardized plan if the aforementioned cost reduction goal is not met.

Nevada’s law, SB 420, is even further from a pure public option. For the purpose of this article, we will refer to the new reduced cost plans as public-option plans although NAHU recognizes the Nevada model is not a public option. The new law requires premiums to be five percent lower than the benchmark silver ACA plan in each ZIP Code and, ultimately, for premiums to be reduced by 15 percent over a four-year period. Additionally, providers must not go below Medicare rates.

How is the state getting carriers to offer the plan? The law compels all Medicaid managed care organizations (MCOs) to provide the public-option plan by requiring all companies that submit a bid to be a MCO to also apply to be a public-option plan. Insurers that don’t apply to be a Medicaid MCO could bid to become a public-option plan as well, but it is unclear how many public-option bids the state will approve. Development and implementation of the public option will fall to the director of the Department of Health and Human Services, in consultation with the head of the Silver State Health Insurance Exchange and the commissioner of the Division of Insurance, with the first coverage year slated for 2025. Providers that accept the state’s Medicaid patients or the state employees’ health insurance plan will be required to accept patients on the public-option plan as well.

Overall, these bills are similar to what Washington State passed in 2019, known as Cascade Care. Washington’s public-option plan required the Washington State Exchange to create a state-contracted insurance option known as a standardized plan, with a standardized plan for each tier of coverage from bronze to gold. The Washington Authority, along with other stakeholders, set the numbers for deductible amounts, premiums, cost-sharing and other vital aspects of a health insurance plan. The state then required any insurer operating within the state exchange to offer these standardized plans to all Washingtonians who are not covered by employer-sponsored plans.