COVID-19 health insurance with calculator

Fact Check: Does the COVID-19 Pandemic Really Make the Case for a Public Option?

January 14, 2021 / The Denver Post
Flatlining ECG line indicating claims are false

One of the lawmakers behind a proposed state-controlled healthcare plan is demanding that COVID-19 recovery measures “must include” that plan. In truth, even before the pandemic, the so-called public option would have caused major damage to the state’s healthcare system and it threatens even greater damage now.

CLAIM: A Colorado version of the public option would have made healthcare more accessible and more affordable amid the pandemic, and the state legislature should add a government-controlled healthcare plan to COVID-19 recovery measures.

FACT: This is false. Long before the pandemic, research and modeling showed the public option would trigger cuts in healthcare services, job losses and higher premiums for the vast majority of Coloradans with health insurance. In fact, some of that research was commissioned by supporters of the public option. And if this policy had been in effect when the pandemic hit, Colorado families and healthcare workers would be worse off, not better off.

In a Denver Post opinion piece, State Senator Kerry Donovan – one of the co-authors of the public option – argued the COVID-19 pandemic proved her proposal was needed. “We saw cracks in our health care system during this crisis – let’s fix those cracks while improving everyone’s health care,” Senator Donovan wrote.

However, the facts show the proposed public option would have caused bigger and wider cracks in the state’s healthcare system.

When Donovan’s bill – HB 1349 – was proposed in early 2020, it was widely recognized that the public option would be financed by cutting hospital budgets. Children’s Hospital Colorado warned the public option bill was “coming after hospitals,” according to CBS Denver, and a Denver Business Journal analysis concluded “most hospitals will be seeing cuts.”

A separate study, covered by Colorado Politics, found 83% of state hospitals would suffer funding losses and 23 rural hospitals would face a higher risk of closure under the proposed public option. 

The Common Sense Policy Roundtable, meanwhile, concluded almost 5,000 hospital jobs could be lost across Colorado under these budget cuts. That is roughly 7% of all hospital sector jobs in our state. “Hospitals would be faced with a choice: Cut services and access to care and/or pass the costs of the Colorado option to the private plans that remain in the individual and employer-provided insurance markets,” the CSPR study found.

Those higher insurance costs would be felt across the economy, causing the loss of more than 6,000 jobs in all sectors and more than $600 million in personal income, CSPR concluded.

But according to 9News, even research commissioned by supporters of the public option found major problems. “There is also concern that the bill will increase premiums for those that have government subsidized healthcare premiums, as was found in the [analysis conducted by the Colorado Division of Insurance and Colorado Department of Healthcare Policy and Financing], a report on which the bill was built from,” 9News said.

Here is what the state study referenced by 9News found: The proposed public option would cut federal assistance for people in the individual insurance market, meaning “subsidized members who choose to remain in their current plan, rather than switching to the Colorado Health Insurance Option would see an increase in their net premium after subsidy.”

In practice, this means the only households to benefit from the public option are relatively wealthy ones that don’t qualify for federal subsidies. For a typical family of four, that means the public option would only benefit households making six-figure incomes or more.

Imagine for a moment what the Colorado response to COVID-19 would look like with fewer hospitals, fewer healthcare workers and higher insurance premiums for everyone besides the relatively wealthy. That is not an argument for imposing the public option on the state’s healthcare system – it’s an argument against such a move.

Nobody questions Senator Donovan’s good intentions. But the facts show the public option she has championed is not the way to increase access to high quality healthcare and reduce what families with low and middle incomes pay for their health insurance.

Instead, the facts show that other measures are already bringing down insurance costs, especially in rural Colorado, in the individual markets that cater to people who do not access health coverage through their jobs.

As we first covered months ago, after years of shrinking options in Colorado’s individual health insurance market, choice and competition are making a comeback. As a result, benchmark premiums have fallen 28% over the past two years and will be average of $351 per month in 2021.

Not only that, Colorado now has some of the lowest individual market health premiums in the country – the 6th lowest when compared to other states. Ironically, Senator Donovan and other supporters of the public option supported one of the measures that has contributed to these more affordable premiums – Colorado’s new reinsurance program.

Instead of using the pandemic to strengthen their political hand, perhaps supporters of the public option should acknowledge there are better, far less damaging ways to improve the affordability of health insurance in Colorado than a huge new state program that takes vital resources away from the front lines of healthcare in our state.