HomeHealth Care NewsBiden Proposes Public Option to Fix Obamacare

Biden Proposes Public Option to Fix Obamacare

Presidential candidate Joe Biden is calling for a public option in the Obamacare individual insurance market.

The idea is that at least one plan would be a government plan and it would compete against for-profit and nonprofit insurers such as Blue Cross and Anthem.

Many Democratic members of Congress tried to make a public option part of the Affordable Care Act. The attempt failed, but lawmakers did succeed in including something similar already in existence: nonprofit cooperative health plans with boards that did not include representatives from the conventional health insurance industry.

Severe Failure Rate

Of the 23 co-op plans created under Obamacare, only four are still in existence: Maine Community Health Options, Montana Health Cooperative (MT and ID), New Mexico Health Connections, and Common Ground Healthcare Cooperative (WI).

Even though the co-ops initially received generous government subsidies not available to competitors, their performance has been disappointing, says Ed Haislmaier, a health policy analyst at The Heritage Foundation.

With 23 co-ops having failed, “that works out to a 79 percent failure rate,” Haislmaier says.

Although it is rarely discussed, the ACA does not prohibit competition from government-run plans. Obamacare allows state and local governments to set up public plans and compete on the exchanges, but few have done so. Some California counties set up their own Obamacare plans, but most no longer exist.

The public plans that did survive largely existed before Obamacare and had experience delivering care. Some, such as MetroPlus Health Plan in New York City and Community Health Choice in Harris County, Texas were created as subsidiaries of hospital systems already in the health care business. L.A. Care Health Plan in Los Angeles County is a government-sponsored “public option” insurer that operates under the same laws and regulations as private insurers. One of seven health care plans on the exchange, LA Care Health plan competes with for-profit and nonprofit insurers.

Weak Competitors

Biden and other Democrats argue public option plans could offer lower premiums, but experience has shown otherwise. L.A. Care Health’s silver plan has the second-lowest premium for enrollees in the northeast part of the county and the fourth-lowest for those who live in the southwest region.

“When public plans compete with private plans on a level playing field, the public plans rarely win out,” said John Goodman, president of the Goodman Institute and co-publisher of Health Care News. “And we have a lot of experience with that.”

Private Medicare Advantage (MA) plans compete against conventional Medicare, and more than one-third of seniors have chosen a private option, says Goodman. As more people reach the age of 65, that fraction will probably grow because MA plans look much like the private plans most people were used to as employees.

“A Brookings Institution study in 2017 found that MA plans have lower costs and higher quality, and for the same number of dollars MA plans can offer better care and more benefits,” said Goodman. “Seniors are responding favorably to that opportunity.”

Public option proponents such as Biden say Medicare with MA is the model for how they would work. Goodman says the experience with Medicare argues against a public option.

“Traditional Medicare has been steadily losing out to private plans,” Goodman said. “If private plans had more freedom to compete, very few people would be left in traditional Medicare.”


AnneMarie Schieber (amschieber@heartland.org) is managing editor of Health Care News.

AnneMarie Schieber
AnneMarie Schieber
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland's monthly newspaper for health care reform.


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