The Public Option for health insurance has long been advocated by some lawmakers. They suggest adding these plans to the health insurance plans available via the Affordable Care Act exchanges will help more people.

There’s only one problem: they don’t work!

When Democrats were first trying to get the Affordable Care Act through Congress in 2009 and 2010, they were forced to drop the public option idea in order to get enough votes in Congress.

They got a watered-down version of the ACA through to then President Obama’s desk, but without any kind of government-operated “public option” health insurance plan other than Medicaid, which is designed for the poor and indigent, not for the mass market.

Stymied in Washington D.C., Democrats have turned instead to state legislatures, looking to pass in the state houses what they couldn’t pass at the federal level.

So far, it’s been a tough sell: the insurance industry has strongly opposed attempts to create health insurance public options.

Just three states have attempted to pass a health insurance public option: Washington, Colorado, and Nevada.

And in all three states, the public options have failed to deliver on their advocates’ promises.

The Public Option in Colorado

Other states are monitoring what’s happening in Washington. Colorado recently passed another version of a health insurance public option, which first became available to consumers in January of 2023.

That rollout, too, has been disappointing.

Under the plan, called the “Colorado Option,” state policymakers expect insurance carriers to reduce prices for plan participants by 5% in 2023, 5% in 2024, and another 5% in 2025.

But thus far, only one insurance company out of the eight doing business in the state’s ACA-qualified health insurance market met the cost-cutting targets expected by the plan’s advocates.

At the consumer level, the promised savings have not materialized. For most Coloradans, the Colorado Option plans are more expensive than the traditional, non-Colorado Option plans. 60 percent of Coloradans have plan choices that are less expensive than the Colorado Option.

And in areas where the Colorado Option plan was the lowest-cost plan available, the savings amounted to less than a dollar per month, according to Colorado Senator Jim Smallwood, an outspoken critic of the plan.

And enrollment, too, has been lackluster: despite massive publicity, only about 35,000 people statewide opted for the plan – approximately 25,000 through Connect for Health Colorado, the state’s health insurance marketplace, and another 10,000 via OmniSalud.

Potential customers didn’t care for the plan’s extremely narrow care networks. Like Washington’s healthcare providers, very few Colorado providers were willing to voluntarily contract with the Colorado Option. 

But instead of learning the correct lesson from Washington’s challenges – that price controls have a long and consistent track record of generating shortages, want, and market failures, public option advocates are doubling down on coercion.

“One thing that the states have learned is you cannot make it optional for hospitals to participate,” said Erin Fuse Brown, the director of the Center for Law, Health & Society at Georgia State College of Law. “Otherwise, there’s just no way for the public option to have a chance. It will never build a sufficient network.”

The Colorado Department of Insurance states on its website that “The Commissioner will enforce premium reductions through the Division’s rate review and a new public hearing process”.

As a result, multiple carriers perceived that the regulatory environment was growing increasingly hostile, l – and elected to partially or completely stop writing business in Colorado, leaving thousands scrambling to find new coverage. 

Carriers are fleeing the state because it’s too expensive to do business here, wrote Smallwood in a recent editorial. “The only people who suffer are Colorado patients

What is not sustainable will not be sustained. Hospitals operate on razor-thin margins as it is – especially in rural and poor areas. If providers cannot charge appropriately to provide healthcare services, they have no choice but to lower the level of care they provide, or close their doors.

If they must be coerced by threat of government action to enter into contracts against their will, they are not likely to provide the optimal level of care. And a bureaucrat waving a magic wand in an attempt to short circuit market prices will not change that.

When it comes to insurance, premiums are just part of the story. Consumers should also look at the quality of the facilities and care providers in the plan’s network, and choose the plan based on the total value of the package. Not on premium alone.

Price controls always cause inefficiency and shortages. Because if government coerces providers and takes away their choice to participate, it won’t be long until restricted networks and options and carriers pulling out of the market cause consumers to  lose their choices, too.

There is A Better Way