NJ Spotlight

Would 'Public Option' Help Stabilize NJ's Health Insurance Marketplace?

With only two providers offering policies, a government-run insurance plan could spur competition, ensure wide range of choices

NJ Spotlight — September 16, 2016

By Lilo H. Stainton

The concept of a government-operated health insurance plan is gaining renewed support among progressive leaders and healthcare advocates, an idea supporters have said could be helpful in stabilizing New Jersey's increasingly volatile marketplace for subsidized healthcare policies.

On Thursday Democratic lawmakers in Washington, D.C. — including Sen. Robert Menendez (D-NJ) — joined labor leaders and other progressive organizations to launch a new push for the so-called public option, an idea debated at length as federal officials crafted the 2010 Affordable Care Act. Both Democratic presidential contender Hillary Clinton and President Barack Obama have endorsed the idea. It is also popular with advocates in New Jersey and was listed as a priority for the NJ For Healthcare Coalition at a conference last week.

A public-option plan is designed to spark competition with private payers on the ACA's online marketplace and ensure low-income patients shopping there for coverage have a choice of quality, affordable insurance plans. (Unlike a single-payer system, the government plan would compete with commercial carriers for business.) While developing any program will take time, such a plan could benefit states with struggling marketplaces, including New Jersey, where three of the five current providers have said they will not participate next year.

Earlier this week, the state Department of Banking and Insurance declared Health Republic Insurance insolvent, forcing the 35,000 policyholders to search for a new plan when the marketplace enrollment period begins in November. That choice is made tougher by the fact that Oscar Insurance Corp., which covers more than 24,000, announced in August it would also stop selling policies in New Jersey next year. Oxford Health Plans, which insures fewer than 12,000 people, made the same decision in May.

While some aspects of the ACA have been highly effective in New Jersey — like expanded eligibility for Medicaid, which allowed nearly 500,000 additional residents to get covered under the publicly funded program — observers have said the marketplace, which insures nearly 300,000 people, has not proven as successful. Consumers are still struggling with shared costs and co-pays, despite the subsidized premiums, and their choice in plans is already limited, advocates note.

The ACA marketplace is open to those who earn too much to enroll in Medicaid, but can't afford the full cost of insurance on the open market. As of now, two private companies will remain active on the marketplace in 2017: Horizon Blue Cross Blue Shield, which now covers more than 149,000 people through these plans, and AmeriHealth Inc., which insures some 56,000 this way. (Both providers also cover customers who do not purchase plans through the marketplace.)

Given the success of Medicaid and its expansion — and ongoing problems with the marketplace — advocates for the public option said greater government involvement is needed to protect healthcare consumers.

"If our current public health insurance programs (Medicare/Medicaid) are any indicator, a public plan that brings lower administrative costs, no expectation of profit and the increased bargaining power of a government agency would be a good, cost effective alternative for consumers and bring greater stability to the Marketplace," noted Maura Collingsgru, healthcare program director for New Jersey Citizen Action. "While the public option isn't a panacea for all that needs to be remedied, recent pullouts of insurers across the country demonstrate that a system built solely on private insurers in not the perfect solution either."

Earlier this year, Assemblyman Reed Gusciora (D-Mercer) went one step further, calling for a statewide single-payer system. In this concept the government would gain significant control over prices, but patients would be in charge of their healthcare decisions, he said. Gusciora noted that he was drawing inspiration from then-Democratic presidential candidate Sen. Bernie Sanders (I-VT), who also signed on Thursday to support the public-option campaign.

While concern about New Jersey's marketplace has been brewing for years, news of the departure of Oxford, then Oscar, and now Health Republic has exacerbated concerns. According to the civil action the state filed with Mercer County Superior court, Health Republic — launched in 2014 with more than $100 million in public capital — had lost nearly $59,000 so far this year and further business would be "hazardous fiscally to its policy holders, creditors and the public." In the filing, the state seeks permission to oversee the company's business as it winds down operations and helps customers find new coverage for 2017.

New Jersey is not alone in its marketplace struggles. After weeks of hints, Aetna announced in August that it would pull out of 11 state exchanges, including Pennsylvania and both North and South Carolina. Experts believe that, as a result, nearly one-third of ACA exchanges will have a single company in the coming year and more than half will have just two providers operating.

Aetna's decision to leave the market "created new urgency for making a public option available to every American," said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, which is working with Democratic lawmakers. The campaign launched a petition on Thursday, while lawmakers approved a resolution that called for a government-run plan to build upon the ACA's success. "We see this as the most significant health care push by Democrats since the passage of Obamacare," Taylor said.

In addition to creating competition, a public option could save significant taxpayer dollars, supporters said. According to a Congressional Budget Office analysis, a public option could cut government healthcare costs by $158 million over 10 years and would extend coverage to most of the 29 million Americans who remain uninsured.

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