Public Option for U.S. Health Insurance Gains Visibility in Debate Over Affordable Care Act

WASHINGTON—Advocates and opponents are gearing up for a life or death battle over a problematic Affordable Care Act in 2017, and the idea of a government option in health insurance is gaining some traction among Democratic legislators.

Almost seven years ago, Congress and President Barack Obama undertook a health overhaul that deliberately avoided a government-run insurance alternative. Such an option has been considered a non-starter among Republicans and some centrist Democrats who oppose it as an unnecessary expansion of government into the nation’s health care system.

A public option would involve a government-run health plan that would compete with private options offered on the health law’s exchanges. It would be different from a so-called single-payer system under which a government-run national health insurance program would cover everyone.

Supporters say a public option would reduce the federal deficit and give the government bargaining power to lower costs, such as for high-price pharmaceuticals.

There are a variety of forms public option could take. For example, it could be a nationwide program, or it could be state-based and only in areas where there are few insurers for consumers to pick from.

Likely Democratic gains in the U.S. House of Representatives and Senate on Nov. 8, along with Democratic presidential nominee Hillary Clinton’s lead in pre-election polls, have generated enough discussion of a public option that opponents are coming out against the idea and forming pre-emptive strategies to fight it.

Powerful lobbying groups such as the American Hospital Association, U.S. Chamber of Commerce, and the Pharmaceutical Researchers and Manufacturers of America are devising post-election lobbying strategies against the public option. Opponents are starting to pen opinion pieces, speak out at media events and gear up for broader public campaigns.

This month, Marilyn Tavenner, chief executive of America’s Health Insurance Plans and other health care industry leaders spoke out against the idea at a conference organized by the Chamber, saying a public option would be a mistake and that other changes are needed to stabilize the ACA’s troubled exchanges, or marketplaces.

On the other side, the Progressive Change Campaign Committee, a liberal policy advocacy group that has backed the public option since at least 2009, is pressing congressional Democrats to rally behind the cause. It has joined with groups such as progressive activists, the AFL-CIO labor movement and Democracy for America, which backs liberal candidates, in a national campaign and has launched a petition drive.

“We see this as the most-significant health care push by Democrats since the passage of Obamacare,” Stephanie Taylor, co-founder of the Progressive Change Campaign Committee, said.

The push for a public option has gained momentum because a number of major insurers have curtailed their presence in the health law’s exchanges, and premiums for many individual plans on the exchanges will show double-digit increases in 2017.

Those developments have made an idea long seen as an impossible dream of liberals a central thrust of Democrats’ plans to fix the ailing health law. Mr. Obama pushed for a public option in an Oct. 20 speech in Miami on the ACA. Mrs. Clinton has been a longtime supporter of the public option and has made it part of her campaign platform this year.

But a public option is unlikely to be much of an issue if Republican presidential candidate Donald Trump wins. His proposals include repealing the ACA, allowing consumers to access drugs from overseas and turning Medicaid into a program funded by block grants to the states. He hasn’t given many specifics about those ideas.

Mr. Trump has come out against Mrs. Clinton ideas for a public option, which he has termed a single-payer system that would be a “disaster.”

Mrs. Clinton’s position is likely to resonate with the party’s liberal voters, especially those who supported Vermont Sen. Bernie Sanders’s calls for a single-payer system during the presidential primaries. “She’s put forward a plan that would help address making health insurance more affordable, both through a public option and a Medicare buy-in,” Jennifer Palmieri, a Clinton campaign spokeswoman, said.

Mrs. Clinton would also allow people over aged 55 to opt into Medicare.

But the public option’s chances of being enacted “are very small,” even if Democrats were to win the House of Representatives, said Brian Blase, senior research fellow at George Mason University’s Mercatus Center, a conservative research center. With Republican staunchly against it, the measure would require support from centrist Democrats, some of whom don’t back the idea.

Even if the public option doesn’t get put on the table soon, Mrs. Clinton, if elected, might push early on for increases in tax credits and cost-sharing in the ACA, he said. Still, Mr. Blase and others say a public option could find its way into negotiations among lawmakers if Mrs. Clinton, as president, were to introduce the idea as a negotiating tactic when Washington takes up fixes to the existing health care law.

Rick Pollack, chief executive of the American Hospital Association, said other changes to the existing health law should be tried instead. “Before we even think about public option, we ought to make sure the new system works,” he said.

Opponents say a public option wouldn’t prevent sicker and more-expensive patients from signing up for insurance that is guaranteed on the exchanges, a factor helping drive up premiums. They say other changes are needed, such as limits on special enrollment periods they claim are being gamed by consumers who wait until they are sick to get coverage.

“There are better, more-effective solutions,” said David Merritt, a spokesman at America’s Health Insurance Plans.

Critics also say the public option would mean lower reimbursements to providers and put private insurers at unfair competitive advantage.

Sen. Jeff Merkley (D., Ore.), who has pushed for the option, says momentum for such a public alternative is on the upswing. “There’s a great opportunity for it when Americans see what happens when choice and competition are reduced,” he said.

Advocates of the public option also point out that current health law allows states to seek waivers, beginning next year, from ACA requirements to build public options of their own, meaning the idea could catch on even without the blessing of Washington. So far few states have indicated they would undertake such an approach. Minnesota is one considering a public option.