HA545 Unit 5 State Coverage Reform Options Paper Example

A Public Option, a Reinsurance Waiver or State Subsidies: A Coverage Reform Paper Setting Three Ways to Make Individual Market Coverage Affordable Before a Composite State's Legislative Health Committee, With Criteria Declared First and the Evidence Weighed Option by Option

[Student Name]

Purdue University Global

HA545: Health Policy

Unit 5 Coverage Reform Paper

[Instructor Name]

[Date]

The state, its market and every figure are composite and bracketed for the writer's own data; the programs cited from other states are real.

The Problem

The state's individual market covers about [210,000] people. Most receive federal premium tax credits that cap what they pay as a share of income, but people with incomes just above the subsidy range, older adults in rural counties and families who face high deductibles find coverage unaffordable. Of the state's [390,000] uninsured adults, an estimated [140,000] are eligible for a marketplace plan but have not enrolled, most citing cost. A review of the research concludes that having insurance raises the use of needed care, protects households from large medical bills and, for several conditions, leads to better health (Sommers et al., 2017).

Who the Uninsured Are

The state's uninsured adults are not one group. About a third have incomes low enough to qualify for Medicaid but have not enrolled, a problem none of these options addresses and one the committee may wish to take up separately. Another third qualify for federal subsidies but say the net premium or the deductible is still too high. The remaining third have incomes above the subsidy range, work for small employers that offer no coverage or are self-employed, and many live in the rural east of the state, where only one or two insurers sell plans and premiums are highest. An option that lowers posted premiums helps the last group most; one that lowers net premiums helps the middle group most.

Criteria

1. Coverage gained: the number of uninsured people expected to enroll.

2. Net state cost: annual cost to the state budget after any federal funding.

3. Effect on hospitals: changes in uncompensated care and in payment rates.

4. Administrative workability: what the state must build and how quickly.

Option A: A Public Option

Who is covered: anyone buying in the individual market who chooses the plan. How it works: the state sets a standard plan design and caps what hospitals and physicians are paid, at a multiple of Medicare rates; private insurers offer the plan through the exchange. What the state must build: plan standards, rate review and a way to secure provider participation. Evidence: Washington offered the first state public option in 2021. In its first year, the plan was the lowest-premium standard silver plan in only [9] of the [19] counties where it was offered, and insurer and provider participation were limited because both were voluntary (Sen et al., 2022). Later changes required hospital participation. Assessment: modest coverage gains, low state cost, payment cuts for hospitals and a heavy build.

Option B: A Reinsurance Waiver

Who is covered: no one directly; the program lowers premiums by paying part of each high-cost claim. How it works: under a federal Section 1332 waiver, the state pays insurers for claims above a threshold, premiums fall and the federal government returns the savings it makes on lower premium tax credits as pass-through funding (42 U.S.C. § 18052, 2024). What the state must build: a waiver application, a funding source and a claims payment system. Evidence: reinsurance programs have lowered premiums for people who buy without subsidies. But because subsidies are tied to the benchmark premium, lowering it can raise what subsidized people pay. After Georgia began reinsurance in 2022, the minimum cost of subsidized coverage rose about [30] percent, and enrollment among people with incomes between [251] and [400] percent of the poverty level fell by roughly a third (Anderson et al., 2024). A program that lowers the posted premium can raise the price that most enrollees actually pay. Assessment: helps unsubsidized buyers, may reduce enrollment among subsidized ones, moderate state cost after pass-through, moderate build.

Option C: State-Funded Premium Subsidies

Who is covered: enrollees with incomes from [200] to [600] percent of the poverty level, who would receive an extra state credit on top of any federal one. How it works: the exchange calculates the state credit at enrollment, lowering net premiums directly. What the state must build: eligibility rules and payment through the existing exchange. Evidence: the Georgia findings above show how strongly enrollment responds to the net price people pay, which is the lever this option moves directly. Massachusetts and California already fund state subsidies on top of federal credits, so the model is administratively proven. Assessment: largest coverage gain among the options, highest recurring state cost, little effect on hospital payment rates, light build.

Comparison

Coverage gained: A [6,000]; B [0] to minus [4,000] among subsidized buyers, plus [3,000] unsubsidized; C [22,000]. Net state cost per year: A [$4] million; B [$18] million; C [$61] million. Hospitals: A lower payment rates, small fall in uncompensated care; B little change; C larger fall in uncompensated care. Workability: A hard; B moderate; C easy.

Effects on Hospitals in More Detail

The state's hospitals reported [$410] million in uncompensated care last year. Enrolling [22,000] more people could reduce that by an estimated [$35] to [$45] million, concentrated at safety-net and rural hospitals. A public option with payment caps would cut rates for the plan's members, which hospitals oppose, but the cut would apply only to a small share of their patients. Reinsurance would leave hospital payments largely unchanged.

Recommendation

Adopt Option C, targeted state subsidies, beginning in the next plan year, funded by [a dedicated health insurance assessment]. It is the only option expected to gain substantial coverage among the people the problem statement identified, and the exchange can administer it quickly.

The Strongest Objection

The strongest objection is cost: [$61] million a year is a recurring commitment that grows with premiums, and if federal subsidies shrink, the state would face pressure to fill the gap. The answer is to cap the program's annual appropriation, set eligibility bands the legislature can adjust and require an annual report on enrollment and cost per person covered.

Implementation

The exchange would write eligibility rules within [six] months. The insurance department would publish premium effects by county. An evaluation in year two would compare enrollment in targeted income bands with neighboring states.

Limits

Coverage estimates depend on how people respond to price, which is uncertain. Cost estimates assume stable premiums. Evidence from other states may not transfer to this market.

Conclusion

Each option helps someone. Only state subsidies are likely to reach the uninsured people the committee most wants to cover, at a price that is high but visible and adjustable.

References

Anderson, D. M., Golberstein, E., & Drake, C. (2024). Georgia's reinsurance waiver associated with decreased premium affordability and enrollment. Health Affairs, 43(3), 398-407. https://doi.org/10.1377/hlthaff.2023.00971

Sen, A. P., Singh, Y., Meiselbach, M. K., Eisenberg, M. D., & Anderson, G. F. (2022). Participation, pricing, and enrollment in a health insurance "public option": Evidence from Washington State's Cascade Care program. The Milbank Quarterly, 100(1), 190-217. https://doi.org/10.1111/1468-0009.12546

Sommers, B. D., Gawande, A. A., & Baicker, K. (2017). Health insurance coverage and health: What the recent evidence tells us. New England Journal of Medicine, 377(6), 586-593. https://doi.org/10.1056/NEJMsb1706645

42 U.S.C. § 18052 (2024). https://www.law.cornell.edu/uscode/text/42/18052