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

by Shefali Luthra .
Tuesday Mar 10, 2020
Insurers Sank Connecticut's 'Public Option.' Would A National Version Survive?
  (Source:Hannah Norman/KHN Illustration)

Health care costs were rising. People couldn't afford coverage. So, in Connecticut, state lawmakers took action.

Their solution was to attempt to create a public health insurance option, managed by the state, which would ostensibly serve as a low-cost alternative for people who couldn't afford private plans.

Immediately, an aggressive industry mobilized to kill the idea. Despite months of lobbying, debate and organizing, the proposal was dead on arrival.

"That bill was met with a steam train of opposition," recalled state Rep. Sean Scanlon, who chairs the legislature's insurance and real estate committee.

Through a string of presidential debates, the idea of a public option was championed by moderate Democrats ? such as former South Bend, Indiana, Mayor Pete Buttigieg, Minnesota Sen. Amy Klobuchar and former Vice President Joe Biden ? as an alternative to a single-payer "Medicare for All" model. Those center-left candidates again touted the idea during the Feb. 25 Democratic debate in South Carolina, with Buttigieg arguing such an approach would deliver universal care without the political baggage. (Buttigieg and Klobuchar have since ended their presidential bids.)

The public option has a common-sense appeal for many Americans who list health care costs as a top political concern: If the market doesn't offer patients an affordable health care insurance they like, why not give them the option to buy into a government-run health plan?

But the stunning 2019 defeat of a plan to implement such a policy in Connecticut — a solidly blue, or liberal-leaning, state — shows how difficult it may be to enact even "moderate" solutions that threaten some of America's most powerful and lucrative industries. The health insurance industry's fear: If the average American could weigh a public option — Medicare or Medicaid or some amalgam of the two — against commercial plans on the market, they might find the latter wanting.

That fear has long blocked political action, said Colleen Grogan, a professor at the University of Chicago's School of Social Service Administration, because "insurance companies are at the table" when health care reform legislation gets proposed.

To be sure, the state calculus is different from what a federal one would be. In the statehouse, a single industry can have an outsize influence and legislators are more skittish about job loss. In Connecticut, that was an especially potent force. Cigna and Aetna are among the state's top 10 employers.

"They became aware of the bill, and they moved immediately to kill it," said Frances Padilla, who heads the Universal Health Care Foundation of Connecticut and worked to generate support for the public option.

And those strategies have been replicated at the national level as a national coalition of health industry players ramps up lobbying against Democratic proposals. Beyond insurance, health care systems and hospitals have joined in mobilizing against both public option and single-payer proposals, for fear a government-backed plan would pay far less than the rates of commercial insurance.

Many states are exploring implementing a public option, and once one is successful, others may well follow, opening the door to a federal program.

"State action is always a precursor for federal action," said Trish Riley, the executive director of the National Academy for State Health Policy. "There's a long history of that."

Virginia state delegate Ibraheem Samirah introduced a new public option bill this session. In Colorado, Gov. Jared Polis is spearheading an effort. And Washington state is the furthest along — it approved a public option last year, and the state-offered plan will be available next year.

But in 2019, Connecticut's legislators were stuck between two diametrically opposed constituencies, both distinctly local.

Health costs had skyrocketed. Across the state, Scanlon said, small-business owners worried that the high price of insurance was squeezing their margins. A state-provided health plan, the logic went, would be highly regulated and offer lower premiums and stable benefits, providing a viable, affordable alternative to businesses and individuals. (It could also pressure private insurance to offer cheaper plans.)

A coalition of state legislators came together around a proposal: Let small businesses and individuals buy into the state employee health benefit plan. Insurers' response was swift.

Lobbyists from the insurance industry swarmed the Capitol, recalled Kevin Lembo, the state comptroller. "There was a lot of pressure put on the legislature and governor's office not to do this."

State ethics filings make it impossible to tease out how much of Aetna and Cigna's lobbying dollars were spent on the public option legislation specifically. In the 2019-20 period, Aetna spent almost $158,000 in total lobbying: $93,000 lobbying the Statehouse, and $65,000 on the governor's office. Cigna spent about $157,000: $84,000 went to the legislature, and $73,000 to the executive.

Anthem, another large insurance company, spent almost $147,000 lobbying during that same period — $23,545 to the governor, and $123,045 to the legislature. Padilla recalled that Anthem also made its opposition clear, though it was less vocal than the other companies. (Anthem did not respond to requests for comment.)

A coalition of insurance companies and business trade groups rolled out an online campaign, commissioning reports and promoting op-eds that argued the state proposal would devastate the local economy.

Lawmakers also received scores of similarly worded emails from Cigna and Aetna employees, voicing concern that a public option would eliminate their jobs, according to documents shared with Kaiser Health News. Cigna declined to comment on those emails, and Aetna never responded to requests for comment.

Connecticut's first public option bill — which would let people directly buy into the publicly run state employee health plan ? flamed out.

So lawmakers put forth a compromise proposal: The state would contract with private plans to administer the government health option, allowing insurance companies to participate in the system.

The night before voting, that too fell apart. Accounts of what happened vary.

Some say Cigna threatened to pull its business out of the state if a public option were implemented. Publicly, Cigna has said it never issued such a threat but made clear that a public option would harm its bottom line. The company would not elaborate when contacted by KHN.

Now, months later, both Scanlon and Lembo said another attempt is in the works, pegged to legislation resembling last year's compromise bill. But state lawmakers work only from February through early May, which is not a lot of time for a major bill.

Meanwhile, other states are making similar pushes, fighting their own uphill battles.

"It really depends on whether there are other countervailing pressures in the state that allow politicians to be able to go for a public option," Grogan said.

And, nationally, if a public option appears to gain national traction, Blendon said, insurance companies "are clearly going to battle."

They're going to go after every Republican, every moderate Democrat, to try to say that ... it's a backdoor way to have the government take over insurance," he said.

Still, when President Barack Obama first proposed the idea of a public option as part of the Affordable Care Act, it was put aside as too radical. Less than a decade later, support for the idea ? every Democratic candidate backs either an optional public health plan or Medicare for All ? is stronger than it ever has been.

So strong, Grogan said, that it is hard for people to understand "the true extent" of the resistance that must be overcome to realize such a plan.

But in Connecticut, politicians say they're up for a new battle in 2020.

"We can't accept the status quo. ... People are literally dying and going bankrupt," Scanlon said. "A public option at the state level is the leading fight we can be taking."

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.


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