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Public Option Could Lower Premiums But Not Raise Insured Rate

Analysis  |  By Jack O'Brien  
   May 28, 2020

The RAND study estimated that premiums for public plans could be 10% to 27% lower than those for private plans under a public option proposal.

The introduction of a public option would lower the cost of premiums but would be unlikely to raise the rate of individuals with health insurance, according to a RAND study released Thursday morning.

The RAND study analyzed four scenarios for adding a public option and estimated that premiums for public plans could be 10% to 27% lower than those for private plans under a public option proposal. 

However, only three scenarios showed a decline in the number of uninsured people, ranging from 3% to 8%. A fourth scenario showed that "the number of uninsured declined marginally."

The study set two scenarios at 79% of the current commercial rates and two other scenarios at 93% of the current commercial rates.

Federal spending declined in all four scenarios, ranging from $7 billion to $24 billion, according to RAND.

Related: Public Plan Option Would Spur Competition

The push to expand healthcare coverage, notably through a public option, has been a lightning rod issue for political leaders and healthcare stakeholders in recent years, especially since the passage of the Affordable Care Act (ACA) in 2010.

RAND concluded that the tax credit structure of the ACA would be less likely to benefit lower-income individuals if a public option were enacted.

“Since higher-income people pay the full cost of insurance on the individual market, they could receive substantial savings under a public option," Jodi Liu, a policy researcher at RAND and the study’s lead author, said in a statement. “But policymakers should consider how the design of a public option could decrease the tax credits lower-income enrollees receive under the ACA."

Related: Insurers Sank Connecticut's 'Public Option.' Would A National Version Survive?

The study is the latest analysis of the impact of the public option, which has been at the center of the ongoing debate over how to expand healthcare coverage.

Over the past year, Democratic presidential candidates have proposed several plans to expand coverage, either through a 'Medicare for All' single-payer system or a more incremental public option plan.

In January, the American College of Physicians released a policy plan recommending the implementation of a single-payer healthcare system or a public option to achieve universal healthcare coverage.

Related: American College of Physicians Backs Medicare for All, Public Option

Months earlier, the Urban Institute released an analysis that estimated the federal government could save $12 billion and reduce the uninsured population by 1.2 million people if a public option were enacted.

Related: Public Option Health Plan Could Lower Costs, Expand Coverage

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

Photo credit: WASHINGTON, DC - OCTOBER 22: Health-care reform advocates march in the streets outside of a meeting of America's Health Insurance Plans (AHIP) on October 22, 2009 in Washington, DC. / Editorial credit: Ryan Rodrick Beiler /

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