Could Wisconsin create its own public option?

A public option for health care might not be a pipe dream if Wisconsin does it on its own with expansion of BadgerCare.
1021 Editorialcontent Health Care Feat 18

Affordable health care is a right everyone believes in; where they differ is in how to achieve that affordability. Like almost everything else these days, there is distinct division in government about the best approach to ensuring every U.S. citizen has access to health care whenever they need it without incurring potentially budget-breaking costs.

The so-called “public option” for health care has been talked about but never put into practice in the U.S., at least at the federal level. However, three states — Washington, Colorado, and Nevada — are now leading the way with their own, state-level versions of a public option. They’re test cases for the implementation and practicality of a public option, which could soon be followed by other states and perhaps eventually the federal government, should they prove as effective at lowering health care costs as projected.

IB decided to look at the likelihood of Wisconsin joining those three states and adopting its own state-level version of the public option, as well as the implications a public option might have on business and consumers if enacted in the Badger State. We spoke with both proponents and detractors of the public option to gauge their impressions about what the economic impact of the public option in Wisconsin might be.

Public-(private) option

It should be noted that neither Washington nor Colorado nor Nevada offers a truly public option where government sets up and runs its own health insurance plan.

Each provides more of a public-private partnership where the states contract with private insurers to create new insurance options that are overseen, but not run, by the government. A June report in Vox notes that “states would face practical challenges to doing a ‘true’ public option — namely, building up the financial reserves they’d need to pay out claims — so they’re taking another approach wherein private insurance companies will run the public option under rules set by the government.” This is what Medicare and Medicaid already do when they use private insurers to administer benefits for some of their enrollees.

The plans from each state will be sold on the Affordable Care Act (ACA) marketplace, along with ACA-compliant private insurance. Only people who are eligible for ACA coverage through the individual and small-group market can sign up.

As noted in the Vox report, “How much to pay health care providers is the most important issue for any health insurance plan — those prices dictate the premiums charged to customers — and these states are taking divergent approaches in their calculations.

“Washington has capped provider payments at 160% of Medicare payment rates. Colorado has dictated that provider rates can’t be lower than 155% of Medicare; however, if insurers fail to achieve a 15% premium reduction, the state insurance commissioner has the authority to mandate lower rates. Nevada has said its public option can’t pay providers less than Medicare, but it otherwise leaves flexibility for the plan to hit its own premium-reduction targets.”

Getting buy-in from all parties — government, private insurers, health care providers, businesses, and consumers — is easier said than done, as Washington has already learned. It approved its public option in 2019 and made it available to consumers for enrollment in 2020. In that first year, some hospitals in the state refused to contract with the public plan and it was only available in 19 of the state’s 39 counties.

Recently signed legislation in Washington is attempting to rectify that by requiring hospitals in large systems to participate in at least one public option plan. Colorado and Nevada have already learned from Washington’s early struggles and included provider participation requirements in their plans from the start.

A public option version of BadgerCare has already been proposed, but opponents of the proposal offer stiff rebuttals to the efforts of Democrat lawmakers and Gov. Tony Evers.

Taking BadgerCare public

If Wisconsin is to create its own public option, it’s going to hear from business interests and private insurers throughout the state first.

“WMC [Wisconsin Manufacturers and Commerce] strongly opposes enactment of a ‘public option’ for health insurance,” says Scott Manley, WMC executive vice president of government relations. “Wisconsin has consistently rejected expansions of government-run health care models and for good reason. A public option would be a failure because government consistently demonstrates its ineptness in executing programs. Moreover, private sector businesses have proven time and again that they are able to deliver services more efficiently, affordably, reliably, and competently than government.

“A public option would also result in higher health insurance costs for many thousands of Wisconsinites because state and federal governments have consistently under-reimbursed medical providers for the services they render on behalf of government programs like Medicare and Medicaid,” continues Manley. “Medical providers shift those losses to businesses and other privately insured patients by charging them higher prices for their services. As a result, prices for employer-sponsored health insurance, which accounts for the majority of health care coverage in our state, will necessarily increase. Because employees pay a share of these health insurance premiums, a public option would result in workers paying more for their health insurance, workers losing benefits/coverage, or a combination of both.”

The Wisconsin Association of Health Plans, which represents community-based health plans across the state, falls on the same side of the issue as WMC.

Information from by the Wisconsin Association of Health Plans notes that Wisconsin’s health insurance market stands out among states for both its high quality and its high competition.

According to the National Committee for Quality Assurance (NCQA), Wisconsin ranks fifth in the country for having the highest-rated health plans. These high ratings come from a strong focus on customer satisfaction, disease prevention, and treatment of common chronic conditions.

Wisconsin also has some of the most competitive commercial health insurance markets in the nation. This is a notable achievement for a state of Wisconsin’s size — other states with highly competitive insurance markets typically have a much larger population than Wisconsin.

“A public option would cut payments to doctors and hospitals by relying on heavy-handed government rate setting and fee-for-service reimbursement,” reads a statement provided by the Wisconsin Association of Health Plans. “These below-cost reimbursement rates would undermine private health plans and increase premiums as providers cost shift to Wisconsinites with private health insurance. Upending the competitive private health insurance market through the offering of a government-run health insurance plan with artificially deflated premiums is not the answer.

“A public option also sidesteps one of the root causes of why millions remain uninsured: a lack of awareness about coverage options,” the statement continues. “The Congressional Budget Office (CBO) estimates 20 million of the 30 million uninsured people in the country have access to subsidized Medicaid, the Affordable Care Act marketplace, or employer coverage. Thus, the vast majority of the uninsured can be covered through existing coverage options without creating a government mandated public option and triggering a range of negative costs and consequences. A focused effort to enroll those who are currently uninsured in existing coverage options will also have the added benefit of making coverage more affordable for everyone.”

“Wisconsin’s community-based health plans are committed to delivering quality, affordable coverage choices so Wisconsinites can get the care they need at a price they can afford,” says Kelsey Avery, director of public policy and communications for the Wisconsin Association of Health Plans. “The Wisconsin Association of Health Plans supports access to health coverage for every person in Wisconsin. State leaders should focus on improving what’s already working in Wisconsin and advance policy proposals that build on the strengths of our state’s uniquely competitive private insurance market.”

Not everyone sees it that way, however.

State Rep. Dianne Hesselbein (D–Middleton) is assistant minority leader and a member of the Assembly Committee on Insurance, and from where she sits, she’s uniquely positioned to discuss the possibility of a statewide public option.

“The people of Wisconsin are in favor of getting to a place where everyone has access to quality, affordable health care,” states Hesselbein. “Gov. Tony Evers included a BadgerCare buy-in plan in his last state budget recommendation. Unfortunately, the legislature did not get to debate the merits of the plan after the Joint Finance Committee stripped that plan and the BadgerCare expansion dollars out of the budget.”

Hesselbein notes that Wisconsin has a unique history of long-standing cooperation between the insurance industry and state regulators, with a driving force that has always been, “What is in the best interests of consumers?”

“If our shared goal is better health care coverage for everyone, we need to look at all the tools we have available to succeed in that mission,” says Hesselbein. “For some, health insurance is tied to their job and that works well for them and their families. If someone likes their current plan, that’s great and they should keep it, but let’s make sure that everyone has the ability to get covered. At the end of the day, what we all can agree on is that all of our neighbors should have access to quality health insurance.”

Hesselbein certainly doesn’t have it out for private insurers. She notes that in any form of competition, the goal should be to get consumers the best coverage for the lowest cost. If consumers aren’t able to receive the coverage they need, they should have the ability to look for other options. However, she’s quick to point out that private insurers are innovative and often work within the marketplace to get the best outcomes for consumers.

It’s where people fall through the cracks that Hesselbein says more needs to be done; a public option could achieve that.

“There are clear steps we need to take to ensure that everyone who needs health insurance can have access to it, and we already know what the cons would be for not having an affordable option for Wisconsinites,” explains Hesselbein. “Take the expansion of BadgerCare, for example. Wisconsin has been missing out on a billion dollars in federal incentives by not expanding BadgerCare statewide. The savings and investments our state is not taking advantage of is costly not only to those not able to access health insurance, but also to our economy. These incentives have only grown under American Rescue Plan Act.”

Shawn Phetteplace, Wisconsin state manager for the Main Street Alliance, notes his organization, which represents the interests of small business owners across the country, strongly supports passing a public option for BadgerCare in Wisconsin.

According to Phetteplace, the Wisconsin Consumer Healthcare Experience State Survey (CHES survey) administered by the Altarum Healthcare Value Hub and Citizen Action of Wisconsin (CAW), and released in March 2020, found that even before the COVID-19 pandemic, 53% of Wisconsin residents experienced a health care affordability burden in the past year and 79% were worried about affording health care in the future. These affordability burdens lead people to delay going to the doctor or having a procedure done (27% of respondents), skipping a test or treatment (24%), and avoiding going to the doctor altogether (22%). Furthermore, 11% of respondents reported using up all or most of their savings in paying medical bills.

“Establishing a BadgerCare public option is arguably the single most impactful action the state could take in a challenging fiscal climate to increase the affordability, value, and quality of health coverage available to middle- and working-class Wisconsinites,” says Phetteplace. “The program would, at little cost to the state, offer high-quality affordable coverage with very low out of pocket medical costs.”

Phetteplace notes that a BadgerCare public option buy-in bill sponsored by Sen. LaTonya Johnson and former Rep. Eric Genrich (now Green Bay mayor) was drafted in 2017. A June 2017 Legislative Reference Bureau (LRB) memo outlined the expected cost to consumers of coverage purchased through BadgerCare Plus. CAW’s 2017 internal analysis found that a BadgerCare buy-in plan could save consumers thousands of dollars over commercial insurance coverage purchased through the marketplace. The state’s cost to administer the program would be incorporated into the cost of premiums in buy-in plans, as described in the LRB memo. Additionally, the state could apply for a federal waiver allowing consumers to avail themselves of the Affordable Care Act (ACA) marketplace subsidies for a BadgerCare buy-in plan. President Biden has pledged to strengthen the ACA subsidies.

“The state could also set provider reimbursement rates for the buy-in plans at a different level than traditional BadgerCare Plus or Medicaid coverage,” explains Phetteplace. For example, buy-in plans could offer reimbursement rates at the level offered by Medicare rather than Medicaid, or at some other negotiated point.

The concept of a BadgerCare public option has broad community support, Phetteplace states. A statewide poll conducted by Badger State Research (BSR) from Nov. 19–24, 2020 found that 78% of respondents supported “creating a BadgerCare public option that allows people to purchase health care coverage through BadgerCare rather than private insurance” and only 19% opposed the idea.

“For consumers there are no downsides,” says Phetteplace. “It provides more choice to the consumer, at a lower cost, for higher quality coverage, and will force private insurers to compete for their dollars. A public option could potentially also help to ensure robust funding for the administration of the BadgerCare program due to improved economies of scale for the program.

“It would also mean that small business owners would have an option for health insurance that would be available regardless of what stage of business development they are at,” Phetteplace continues. “Passing a BadgerCare public option would be good for business because it will make it easier to start and run a business instead of staying in a job to have access to group coverage. More business creation in Wisconsin is good for our economy and a public option in BadgerCare would help to grow that trend. It would also help to ensure that employees of smaller employers have an opportunity for good quality coverage. Small businesses are put at a competitive disadvantage for attracting employees versus big businesses because of the inherent advantage bigger businesses have on being able to offer group health insurance.”

Both Phetteplace and Hesselbein disagree with the notion that getting government involved will only lead to higher costs.

“It will reduce costs,” Phetteplace affirms. “Washington, Nevada, and Colorado have projected that a public option will save consumers 5% in the short term and 15% in the long term. These programs are either all new or in the process of being set up, but we expect that to be born out since these plans do not need to be profitable.”

“I think we are all working to find ways to make health care more affordable,” adds Hesselbein. “If you take the example of states that have expanded Medicaid versus those that haven’t, such as Wisconsin, health care costs including private premiums can actually get lower. I’m an optimist, so I believe we can do better when it comes to the cost of health care.”

The two public option proponents also note that should Wisconsin follow states like Washington, Colorado, and Nevada, it will have the benefit of having much of the groundwork already laid out for it.

“We have to remember that this pandemic highlighted the inequalities in our health care system,” says Hesselbein. “Families across Wisconsin are having to choose between a health care bill or putting food on the table and paying rent. Wisconsinites are just one health crisis away from a financial breaking point. Providing affordable health care options for everyone is something that people favor. The Affordable Care Act helped close some of the gaps, but we have a long way to go to make sure that every Wisconsin resident has the health care they need and can afford.”

“More states will follow the lead of Colorado, Nevada, and Washington,” agrees Phetteplace. “The economics of health care and the role of the state almost make it a financial necessity. The biggest barrier to movement on establishing a public option federally is the American Health Insurance Plan (AHIP) lobby, among others. On a state-by-state level, with more progressive state legislatures and governors’ offices, there is opportunity to be the laboratories of democracy.

“As states experiment with different versions of a public option, we will determine best practices that will help all states run the programs effectively,” Phetteplace adds. “As evidence grows that a public option is a fiscally prudent action by states, that will help to escalate pressure on Congress to get it done. Economies of scale at the federal level could help to further reduce costs.”

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