Lead Sponsor: Senator Jamie Eldridge

Summary: This bill would create a public health insurance plan (“public option”) to compete with private insurance plans in order to give consumers more choices, increase competition and encourage insurance companies to cooperate, share information, and reduce costs.

Why This Matters: In Massachusetts, three insurance companies have a combined market share of nearly 70% of the health insurance market.  Having a meaningful number of options available to Massachusetts families is a necessary component of a health care system that can control costs.  Having a public option would give Massachusetts families more choices.

In addition, a public plan could operate without excessive administrative and marketing costs, high executive salaries or a need to generate profits.  As a result, a public option could provide a good deal for consumers and keep pressure on private insurers to keep their policies affordable and treat their customers well by acting as a benchmark for affordability and quality of care.

What this Bill Would Do: This bill would charge the Connector Authority with setting up a public health insurance plan to be made available through the Connector.

A modest surcharge on insurance reserves would cover the start up costs of the plan, which would be paid back over time with the revenues generated by the plans premiums.  The plan would be self sustaining after a period of one year.

The bill also would establish the authority of the state to adjust the reserves of health insurance companies in Massachusetts based on the proportion of risk they have assumed compared to other companies. This prevents any one health insurance provider – private or public – from assuming a disproportionate amount of risk of having proportionally sicker patients, avoiding the “death spiral” problem that could otherwise occur.