The Oregon Health Authority (OHA) recently released its Public Option Implementation Report. This report stems from legislation charging OHA, in collaboration with Department of Consumer and Business Services (DCBS, which houses the state insurance division), with developing a plan to make a public health insurance option available in the individual market and, potentially, the small group market as well. The report builds on the agencies’ draft “Recommendation Memo,” and was further informed by three stakeholder working sessions and a preliminary actuarial analysis.

The Report’s Recommendations

A New Public Option Model

The new report recommends that the state pursue a “Coordinated Care Model,” where licensed insurers offer a silver-level public option plan in Oregon’s Affordable Care Act (ACA) individual marketplace. Although these plans would be open to anyone eligible for individual marketplace coverage, the public option plans would target individuals between 138 percent and 250 percent of the federal poverty level (FPL) and resemble coverage offered by Medicaid coordinated care organizations (CCOs), rather than more closely mimicking other marketplace plans. For example, the public option plans would be designed to provide culturally and linguistically appropriate services and supports and maximize continuity of care with Medicaid, including by aligning provider networks and contracting with traditional health care workers like doulas and community health workers. The plans would also include  state-financed cost-sharing subsidies that bump their actuarial value up to between 94 and 98 percent, and, if financially feasible for the state, provide dental coverage in addition to the normal suite of Essential Health Benefits.

Cost Containment Policies

To contain costs, the public option plans would be subject to a “rate reset”—legislatively mandated premium reductions—and held to a statewide cost growth target of 3.4 percent going forward. As we have discussed in a blog post for the Commonwealth Fund, Colorado and Nevada included similar measures in their public option laws. These provisions present implementation challenges, though, particularly regarding how to ensure health care providers participate in plans that offer lower reimbursement rates than they are used to receiving. Accordingly, the report advises that Oregon could  potentially mandate provider participation in “carefully targeted ways.” For example, the legislature could vest powers to enforce provider participation with DCBS as part of the rate review process, similar to what the Colorado law provides.

Impact of New Plan Offerings on Marketplace Premiums

Notably, the report acknowledges that the proposed rate reset could erode the value of premium tax credits by introducing a new, lower cost silver plan, thereby changing the “benchmark” silver premium. While individuals who purchase the benchmark plan (or a cheaper option) would not be impacted, individuals purchasing more expensive plans would face higher premium payments than in prior years. Theoretically, this effect could be offset by pass-through funding from the federal government under a Section 1332 Waiver for the savings generated by the rate reductions, but the report instead proposes using any pass-through dollars to cover the costs of adult dental benefits and eliminating nearly all cost-sharing obligations for individuals up to 200 percent FPL. (In a January public meeting regarding the report, however, state officials raise the possibility of also using pass-through funding to provide “additional assistance toward the cost of monthly premiums.”)

Tackling Health Inequity

The report also discusses several additional steps the state could take to ensure that the public option contributes to Oregon’s goal of ending health inequities. For example, the report proposes imposing equity-focused governance requirements on insurers that offer public option plans, such as including members of the public to serve on an insurer’s governing body or establishing an advisory board “to ensure both insurance expertise and equity-based governance are represented in leadership.” The report also recommends aligning public option plans with broader state efforts to improve quality and value, including by applying the state’s “Aligned Measures Menu”—a set of 57 health care quality measures reported on by both private and public plans—and new health equity measures currently under development.

If the state were to move forward with their public option plan, Oregon may need to transition to a full state-based marketplace (SBM) to implement all the features proposed. For example, the federally facilitated marketplace does not currently accommodate state-specific cost-sharing subsidies. Additionally, the report advises that adoption of a public option should be accompanied by a robust outreach campaign to inform the public about their options for affordable coverage and to assist with enrollment.

What’s Next?

The Oregon legislature is only in session for just over a month in 2022, from February 1 to March 7. According to an interview with Rep. Andrea Salinas, the vice-chair of the Oregon House Interim Committee on Health Care, we shouldn’t expect the legislature to pass comprehensive public option legislation during this short window. Instead, legislators are likely to focus on some foundational elements to improve consumers’ experiences transitioning between Medicaid and the marketplace ahead of the ending of the Public Health Emergency and associated coverage disruptions, and prepare to tackle the big questions involved in establishing a public option in 2023.