Public option may not significantly drive down uninsured rate, study finds

Launching a public option on the Affordable Care Act’s (ACA’s) exchanges could lower premiums but isn’t likely to make a significant dent in the number of people without insurance, a new study shows. 

Researchers at RAND Corporation modeled four scenarios in which a public option was offered on the ACA’s insurance exchanges and found premiums would be between 10% and 27% lower than private plans due to lower provider payment rates. 

However, a public option was less impactful on the uninsured rate, according to the study. In three of the models, the number of people without coverage declined between 3% and 8%, while in the fourth it declined marginally. 

RELATED: Moody’s—How a public option could impact insurers’ bottom lines 

The study also notes that low-income people enrolled in ACA plans may see limited benefits from a public option, as their coverage is already highly subsidized. Jodi Liu, the study’s lead author and a researcher at RAND, said some people may end up worse off. 

“The impact on them might not be as large as you’d expect if you’re just thinking about the premiums,” Liu said. 

The study weighed how many enrollees would be considered “better off”—becoming newly insured or paying less for a similar or more generous plan—or “worse off”—losing coverage or paying more for an equivalent or more generous plans—if a public option were launched. 

The researchers estimate that between 5.1 million and 12.1 million would be considered better off thanks to a public option, while between 2.2 million and 6.8 million would be considered worse off. 

Those who would potentially end up worse off due to a public option were largely earning less than 400% of the poverty level. As subsidies are tied to silver plan premiums, the addition of a public option could lower their subsidies—dropping the premium but also potentially increasing what they pay out of pocket. 

RELATED: ACA premiums are declining in 2020, but costs vary widely between counties, KFF finds 

Liu said discussions about a public option are frequently focused on the impact on premiums, and policymakers may not “fully appreciate” the impact on subsidies. 

The study also suggests a public option would likely draw significant interest from enrollees who may switch from private coverage. However, a group of the sicker and more expensive members would likely stick with private plans, as they may perceive access barriers in a public one. 

This could lead to higher premiums in some cases, according to the study. 

The RAND team also modeled the impact of a public option on federal spending. The researchers estimate that a public option could save between $7 billion and $24 billion per year due to decreased subsidies.