Benefits Byte

July 27, 2021

Council Urges Lawmakers to Focus on Health Care Costs Rather than Public Option

In a detailed letter to key congressional committee chairs on July 26, the American Benefits Council raised serious concerns about the potential disruption caused by a public health insurance option.

As we reported in the June 1 Benefits Byte, Senator Patty Murray (D-WA), chair of the Senate Health, Education, Labor, and Pensions (HELP) Committee, and Representative Frank Pallone, Jr. (D-NJ), chair of the House Energy and Commerce Committee, have announced their intent to work alongside other lawmakers who have already released public option proposals. To begin that process, they issued a request for information (RFI) on a public health insurance option on May 26, articulating the goals of “achieving universal coverage, while making health care simpler and more affordable for patients and families.”

While the Council agrees that bold legislative and regulatory actions are needed to lower the cost and improve the quality of health care, our letter explains that “a public option designed in a way that makes employer coverage more expensive will only exacerbate the problem and will not address the root causes of rising health care costs in the first place.”

The Council’s July 26 letter and detailed appendix responds to questions asked by the lawmakers – citing empirical and academic evidence – and poses additional questions that must be answered to understand the implications of a public option on the current system. More specifically, the Council’s response to the RFI references several overarching themes that are then supported in great detail in the comprehensive appendix.  These themes include:

  • Employers play a critical role in the health care system, delivering high-value, innovative coverage that represents a tremendous bargain for beneficiaries and the federal government.
  • Impediments to employer innovation persist and threaten to curtail this value. These challenges include misaligned incentives that reward health care providers for quantity rather than quality, market consolidation of health care providers, a lack of transparency and fundamental market failures that stifle competition and increase costs.
  • Employers are deeply concerned about health care costs and bold action is needed to address the root causes of rising costs. All health care reforms should be closely scrutinized based on whether they advance, impede or ignore employer efforts to lower costs and improve value.
  • Employers and private insurers pay hospitals almost two-and-a-half times what Medicare would have paid for the same services. Employers urge policymakers to reject any policy changes that put an even greater burden on employer plans, relative to government programs, and widen this gulf further.
  • Employers recognize that federal government action is required to restore a competitive and value-based health care market. Employers want their businesses and employees to benefit from these congressional and administrative actions – not just bear the burden of them.
  • As with all sweeping policy proposals, the devil is in the details. If improperly constructed, a public option could create upward pressure on commercial prices, exacerbate cost shifting from the public sector to private plans, destabilize employer plan risk pools and/or impose steep tax burdens on employers.

The timeline and likelihood of further action on a public option is unclear. Part of President Biden’s 2020 campaign agenda for health care included support for a “public option” under which the federal government would compete with private insurers in the Affordable Care Act (ACA) exchanges. While Biden’s Fiscal Year 2022 budget proposal reiterates his support for “providing Americans with additional, lower-cost coverage choices by … creating a public option,” the budget does not include funding for the public option, nor is a public option expected to be included in broad budget reconciliation legislation under consideration in Congress. While public option legislation is unlikely to advance this Congress, it will be part of the health policy debate and, therefore, important to discuss the implications for employer-sponsored health coverage.

For more information, contact Ilyse Schuman, senior vice president, health policy.