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Public option health plan for California could save millions

Two emeritus professors at UC Berkeley School of Public Health have proposed a California public option health insurance plan called Golden Choice that could save more than $243 million in its first year and lower insurance premiums throughout the state marketplace.

Richard M. Scheffler, Distinguished Professor Emeritus of Health Economics and Public Policy, and Stephen M. Shortell, Distinguished Professor of Health Policy and Management Emeritus and the former dean, examined its benefits in an issue brief published April 21 by the Commonwealth Fund.

“Steve and I decided to do this study when we recognized that the health insurance premiums for working families were increasing two and a half times faster than their wages over the last decade or so,” said Scheffler in an interview. “Health care essentially was becoming unaffordable for these families, and especially for underserved minorities.”

Despite significant support from the Biden administration and the majority of voters, the professors wrote, government-established insurance plans known as “public option” plans have not gained traction at the federal level.

However, several states, among them Washington, Colorado, Nevada, and Minnesota, have launched such plans, and other states are developing them. Some of these public option plans are established and run by government agencies and others are created by the government, then run by public-private partnerships. Most rely on price caps or regulations, such as requirements that insurers offer a public option plan to participate in Medicaid.

Scheffler and Shortell’s Golden Choice plan is instead based on California’s delegated model of health care, in which provider organizations accept the financial risk of delivering health care services and their earnings are linked to their ability to keep patient care costs within a budget.

“By forming a network of low-cost, high-quality integrated providers that accept risk, the new public option could offer a lower premium than many of the health plans currently available in the state,” they wrote. “Not needing to turn a profit would further enable Golden Choice to keep premiums lower.”

The authors conducted an analysis of the 19 Affordable Care Act (ACA) regions in California to determine whether Golden Choice would be competitive against the plans that are currently available on Covered California, the state’s health insurance exchange. They also interviewed seven leaders of health plans and medical groups for their views.

Their analysis showed that Golden Choice would have the lowest premiums in 14 of the 19 covered California regions and save the state $243 million in one year, if they applied for a special waiver from the Centers for Medicare and Medicaid Services. Scheffler and Shortell propose that some of the savings be used to pay for deductibles and copayments for enrollees.

“Plan and medical group leaders reported that under Golden Choice, they could provide high-quality care while operating with premiums of five percent to 10 percent less than current plans,” they wrote.

Scheffler and Shortell’s next step will be reaching out to other county health plans in California, to see if they are willing to offer such a plan. The researchers will also explore whether the Golden Choice plan would be attractive in the commercial market.

“The research is clear. It’s been well reviewed by colleagues across the county,” Scheffler said.

“It is one approach to making healthcare more affordable to more people in the state,” Shortell added.

The authors wish to acknowledge data supplied by the Integrated Healthcare Association, California Public Employees’ Retirement System (CalPERS), and L.A. Care.  They also acknowledge contributions from Daniel R. Arnold and Arjun Teotia, postdoctoral fellows at the Nicholas C. Petris Center on Health Care Markets and Consumer Welfare, UC Berkeley School of Public Health; and Petris Center undergraduate researchers, Crystal Haryanto, Anna Kirkland, Karissa Lin, and Maia Modjahedpour.

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