Hearings Leave Lawmakers With More Questions Than Answers On Public Option’s Costs & Consequences

Committee hearings yesterday in Minnesota’s House and Senate left lawmakers with far more questions than answers about the potential costs and negative consequences of creating a proposed new public option health insurance system in the state. The hearings served as a reminder that legislators should slow down and not rush to pass a risky, unaffordable new health insurance system into law.

On Tuesday, officials from Minnesota’s Department of Commerce briefed members of the House’s Health Finance and Policy Committee, and later the Senate’s Commerce and Consumer Protection Committee, on the department’s recent report and recommendations on the proposed public option.

The hearings, at which legislators took no action, underscored the department’s repeated acknowledgement that their report lacks critical information on the costs and consequences of creating the public option, including the fact that it “does not capture the full fiscal impact to the state or the health care system more broadly.”

Lawmakers continue to lack critical answers regarding the proposed new state government-controlled health insurance system, including:

• What would be the true cost to Minnesota taxpayers and consumers to create and operate this proposed new health insurance system – including the costs of building and administering the system, IT and other significant expenses that are not included in the department’s report?
• How could creating the public option distort Minnesota’s health coverage markets, including for employer-provided coverage and individual coverage options?
• Could consumers in employer-provided coverage or other private plans end up paying more under a public option system due to these market distortions?
• Would creating the public option with a lower reimbursement rate to hospitals and health care providers have negative consequences for Minnesotans’ access to care, such as by narrowing the network of providers available to patients or by putting vulnerable hospitals at greater risk due to unsustainable reimbursement rates? If the reimbursement rates were raised to address this concern, how much would that raise the cost of the system for taxpayers and consumers?
• And, as the editorial board of the Star Tribune asked: “Minnesota’s uninsured rate is 4.7%. Milliman concludes that two-thirds of those uninsured would not be eligible to enroll. Of those eligible, many may not want to pay a monthly premium for coverage. If a major goal is to reduce the uninsured rate, is there a better way to achieve this?”

Last week, the Star Tribune’s editors raised numerous additional questions and cautioned legislators that “implementing a public option is a dauntingly complex undertaking,” urging that a “risk-benefit calculation should be at the forefront of policymakers’ minds” in debating whether to push ahead with the creation of the new health insurance system. “None of these questions have easy answers,” they pointed out.

The facts show that the public option has failed in the states where it has been tried, and research warns that creating the same unaffordable new health insurance system in Minnesota could threaten patients’ access to affordable, high-quality care, especially in rural and underserved communities where it could put vulnerable hospitals at even greater risk.

Additional Background:

The Minnesota Department Of Commerce Acknowledges That Their Report Leaves Many Key Questions Unanswered Regarding The True Costs And Consequences Of Creating The Public Option Health Insurance System.

• In their February 1 letter to legislators sharing their report and outlining recommended next steps, the Department writes: “We recommend that the Legislature continue its analysis of a public option and address several outstanding policy, budget, and implementation questions … The report does not capture the full fiscal impact to the state or the health care system more broadly. In other words, the report should not be read as a replacement for a fiscal note that would more fully capture total costs of operating a public option … In addition, it provides only a portion of the information needed to apply for a Federal 1332 waiver to operate the program … Additionally, while Milliman report (sic) projects potential costs to pay for this health coverage, it does not analyze options for the source of the state’s payments or suggest additional revenue streams . We recommend the legislature continue its analysis of a public option and address several outstanding issues beyond the scope of this report.”

An Analysis Warns The ‘Public Option’ Would Have Negative Consequences For Minnesota Patients. 

An analysis conducted last year by economists at FTI Consulting, an independent global advisory firm, found that creating the “public option” or “state government option,” would harm Minnesotans’ access to affordable, high-quality health care.

• The analysis warned that the public option would reduce the uninsured rate by only 0.5 percent but could lead to revenue losses for hospitals that are especially harmful for patients’ access to hospital care in rural and underserved communities.
• Read the full FTI Consulting analysis here.

The ‘Public Option’ Has Failed In The States Where It Has Been Tried.

In Washington state, the first to fully implement a state government public option, the system has been plagued by unaffordable costs and low enrollment. And despite bold guarantees from state officials, it has done almost nothing to lower the state’s uninsured rate.  

• Proponents of Washington’s public option estimated public option plans would have premiums five percent to 10 percent lower than traditional plans on the exchange. 
• Instead, public option premiums in the first year of implementation were, on average, 11 percent higher than the lowest silver plan premium available in each county on the marketplace. In some cases, public option plans cost up to 29 percent more than private plans.
• Two years after the state government public option was implemented,  POLITICO reported that “costs have not come down enough yet to make a real dent in affordability or in the rates of uninsured and underinsured” and “the policies haven’t yet achieved the kind of sweeping change that proponents had hoped.” 

Meanwhile, Coloradans continue to face higher premiums and reduced coverage options under the Colorado Option.

• While the statute creating the Colorado Option promised five percent premium reductions by 2023, 10 percent premium reductions by 2024, and 15 percent premium reductions by 2025, in 2023 and 2024 the program has objectively failed to achieve the promised premium decrease or the resulting affordability. 
• Colorado Option rates increased this plan year by seven percent over 2023 rates, and this is on top of a double-digit increase in Colorado Option premiums over 2022 premium levels. 
• And since the Colorado Option was implemented, four health insurance providers have withdrawn from Colorado’s individual market, small group market, or both – leaving consumers with reduced competition and fewer health plans from which to choose.

Learn more about Minnesota’s Health Care Future here.