What is 'public option' health insurance?

Exam room
Public option health insurance is generally praised by the political left, and disdained by the right.
Jeffrey Thompson | MPR News file

Updated Feb. 8, 2017 | Posted Jan. 24, 2017

Gov. Mark Dayton is proposing a public option to address skyrocketing premiums for people who buy their own individual and family health insurance.

The basic idea is that the state would sell health insurance to the general public. In Dayton's plan, anyone interested could buy coverage under the MinnesotaCare program, which currently offers subsidized insurance to qualified low- and moderate income Minnesotans.

The MinnesotaCare public option would likely be another choice on the MNsure health insurance market where it would compete with plans sold by the state's big health insurers like Medica and HealthPartners.

As MPR News's Brian Bakst reported, eliminating the income cap on eligibility could double enrollment to about 200,000 people.

Here's how things might shake out:

What coverage could I get?

Dayton said his proposal "could offer better benefits than many policies presently on commercial markets; more options for people to keep their doctors and clinics; and less expensive coverage than what is available today."

The MinnesotaCare public option would offer two new choices that are comparable to the "Silver" and "Gold" plans sold on MNsure, according to Department of Human Services Commissioner Emily Piper.

The silver plan would pay 70 percent of a person's expected health expenditures, and gold plan would cover 80 percent. The policy holder would be responsible for the remaining costs through a combination of deductibles, co-pays and co-insurance.

It's difficult to gauge the total out-of-pocket cost for any individual, but here's an aggregate approximation using data from 2013, the most recent we could find. Spending on health care in Minnesota was $7,552 per person that year.

Assuming that level of spending for an individual, the consumer's 30 percent share under a theoretical MinnesotaCare public option silver plan that year would have been $2,266; $1510 under the gold, 20 percent option.

Officials with the Minnesota Department of Human Services say they assume that the Affordable Care Act rules governing cost-sharing and affordability would apply to the new public option offerings. The U.S. Department of Health and Human Services sets the out-of-pocket maximum every year. For 2017 there's a maximum of $7,150 for individuals and $14,300 for family coverage.

What would it cost?

• For consumers: The Department of Human Services estimates the statewide average monthly premiums for the public option next year would be $469 per month, or, for the full year, $840 less than the average cost of commercial insurance this year.

The average statewide silver premium would be $451 per month, and the gold would be $513 a month.

The Dayton administration says the public option can bring down premiums "because it leverages the buying power of more than 1 million Minnesotans enrolled in public plans."

• For the public: State government, which administers Medicaid and MinnesotaCare programs, pays for services from medical providers all over the state.

Expanding MinnesotaCare would include a one-time startup cost of $12 million, Dayton said — a tiny fraction of the cost to build MNsure.

Consumers would cover the cost of the program's operations through their premium and out-of-pocket payments.

Will this actually pass?

Dayton's proposal involves several aspects the Republicans in control of the Legislature are unlikely to approve.

• The state would compete with commercial insurers to sell coverage on the individual market.

• Continuation of a tax on medical providers that is currently scheduled to end after December 2019.

The proposal would also require federal approval, which seems unlikely under the Trump administration.

Trump's campaign website says a public option would drive away private insurers, "leaving Americans with fewer options and eventually no choices but a government run plan."

Editor's note: This FAQ has been updated with new information on out-of-pocket expenses and to clarify that the MinnesotaCare public option would offer two new choices that are not available now.

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