Nevada's Public Option Continues Healthcare's Cost Versus Coverage Debate

Opponents' primary argument is that covering the uninsured, while noble, fails to address healthcare's other related albatross—skyrocketing costs, including for prescription drugs—with fixed premiums and lower reimbursement rates applying further constraints.

In May 2021, Nevada’s Democratically controlled legislature passed SB 420, authorizing a Public Option for uninsured residents who fall between Medicaid eligibility and up to and including marketplace options. Signed by Gov. Steve Sisolak, the Public Option also covers small businesses with The Wall Street Journal headlining that the "future of U.S. Healthcare may be playing out in Nevada."

We’ve heard this before, more than a decade ago in fact when Massachusetts was cited as the model for the Affordable Care Act (ACA). “Romneycare” and “Obamacare” had similarities and differences but one truth remains: government-sponsored healthcare remains a challenging discussion in the U.S. The groups opposing the new Nevada law cite potential destabilization of the current marketplace, a similar argument in 2009–2010. Bob Foesset of the Las Vegas Review-Journal writes: "I suspect secretly that many Republicans and some Democrats will be happy with the new 'public option' program that the Legislature just passed, as it is only partially 'public.'

This is true, given that private carriers will provide coverage—and one that operates against a relatively diverse payer landscape. Nevada is one of 15 states that operates its own health insurance exchange (HIE), with New Jersey and Pennsylvania joining the roster in November 2020. Five carriers currently offer Nevada HIE plan coverage: Health Plan of Nevada (HPN, from UnitedHealthcare), Silver Summit (Centene), Anthem, as well as Friday Health Plans (FHP), and Select Health. The former three also offer Nevada Medicaid plans. Anthem offered no exchange plans from 2018–2019 but re-entered, with FHP and Select entering the marketplace for 2021. Anthem, Select, and United also offer Medicare Advantage plans in Nevada, in addition to eight other carriers.

So how is Nevada's so-called Public Option unique and how is it more of the same: State small businesses plus Nevada residents who make more than 138% of the federal poverty level (FPL) —the upper limit of Medicaid eligibility—could purchase a Public Option plan from bidding commercial payers. So could those currently eligible for an ACA marketplace plan, which are now more affordable thanks to new subsidies enacted by the American Rescue Plan Act (ARPA) and in place through 2022. Nevada’s new program requires Public Option plans to be priced at 5% less than exchange plans and up to 15% less over the program's first four years.

Opponents' primary argument is that covering the uninsured, while noble, fails to address healthcare's other related albatross—skyrocketing costs, including for prescription drugs—with fixed premiums and lower reimbursement rates applying further constraints. Reimbursement rates are an ongoing challenge for which there is no easy answer. Kaiser Family Foundation captures the dilemma well: "Policymakers and analysts continue to debate whether relatively high payments from private payers are necessary to compensate for lower Medicare payments, and the extent to which providers could operate more efficiently to reduce costs." Noting that even efficient providers "appear to be ... losing money on Medicare patients over the past few years," KFF proposes a transition period for payer-provider adaptation.

For Nevada’s Public Option participants, a transition could be particularly helpful as carriers will be expected to "use ... payment models that increase value for persons enrolled ... and the State," including pay-for-performance, while offering aggregate reimbursement rates that are "comparable to or better than ... Medicare." America's Health Insurance Plans (AHIP) joined a variety of opponents, responding to the legislation this way:

"Creating a new set of health plans that look identical to other plans but with capped reimbursement rates does not address the underlying high costs of care, and will only serve to raise costs outside of the individual market as health care providers seek higher reimbursements to remain whole."

SB 420 also requires participating carriers to "[d]emonstrate alignment of networks of providers between the Public Option and Medicaid managed care, where applicable" and for current Medicaid and Public Employees' Benefits Program providers to participate "in at least one network" for the Public Option.

Despite pushback, it is unlikely that the state's current and largest plans would decline to participate. HPN, Silver Summit, and Anthem are the likely candidates to cover this as-yet un-served sliver of the market, given their size and that they also offer Medicaid plans in Nevada, with those providers required to participate in at least one Public Option network. The state's current Medicaid plans are required to bid. This sliver will be larger if the subsidies offered by ARPA are not made permanent—a move that many (including AHIP) support. If not, the Public Option's participating health plans are looking at two different cost scenarios within the 5%–15% lower premiums to be achieved over time.

There is evidence, however, that plans with Medicaid lines of business tend to be more successful on the exchanges. While commercial plans tend to enter the Medicaid market slowly, the Urban Institute and Robert Wood Johnson Foundation have found that:

• Medicaid insurers tend to lower and maintain lower premiums across the marketplace
   
• "Preexisting relationships" with providers who serve lower-income populations is advantageous and adds to member volume
   
• This is true for providers as well, who gain leverage from existing contracts
   
• Managed Medicaid plans often have lower administrative costs and more utilization controls, which give their commercial-only counterparts more runway to adopt

The dynamics answer an important question, one that could be framed: What is the business model of plans that know how to succeed on the ACA marketplace? Consistent marketplace participation is another important consideration for Nevada's new Public Option success. Beginning in 2021, three or more plans participated in the marketplace for the first time since 2015. Only one to two plans participated in most of the state between 2016–2019 with a portion of the Las Vegas Metropolitan Statistical Area (MSA) flip-flopping between lesser and fewer plans over time.

While the ship may have sailed given that SB 420 is now law, implementation will reinvigorate discussion that could lead to compromise. Pre-passage proposals from opponents included:

• Enrolling Nevadans in existing, subsidized programs they are already eligible for. However, plans and other opponents—including AHIP—contend that the sliver would still be just a sliver and that state policymakers should "focus on getting the most vulnerable populations enrolled in the affordable coverage that is currently available." This includes the 65% of Nevadans who are eligible for but not enrolled in either Medicaid or a current zero-cost exchange plan. Conversely, and accurately, "[t]here is simply a portion of the population who will not enroll."
   
• Along these lines, providing additional State-initiated subsidies or initiatives to support existing options. These include a 1332 waiver or a more automated eligibility process for Medicaid and Exchange plans, encouraging easier enrollment.

With the Public Option, the state could largely be hedging its bets and creating a more permanent, homegrown solution if exchange-plan subsidy increases disappear after 2022 and in light of past perpetual challenges to the ACA. The latter may be waning, however, given the Supreme Court's June 2021 ruling that essentially dismissed the latest challenge because the plaintiffs' claims lacked merit of injury.

Conversely, claims that the Public Option would erode the stability of current marketplace and employee plans may be exaggerated. Is that likely to occur if all 0.5% of eligible Nevadans (less than 15,000 people—many of whom may be unemployed and not receiving company coverage)—are enrolled in the Public Option? The Public Option could increase awareness of and enrollment in the existing Medicaid and exchange plans which may appear more trusted by comparison—particularly given Medicaid’s continuously open eligibility period and recent marketplace open enrollment extensions.

So, will what happens in Nevada stay in Nevada or will others join the Silver State and its predecessors (Washington and Colorado) in these stop-gap efforts? It will be a space worth watching as Nevada lawmakers, payers, and providers come to the bidding and bargaining table later this year.