America’s next big healthcare reform might already be underway

If you live in Colorado and buy your own health insurance, there’s a good chance you’re one of the 139,000 people enrolled in a public plan crafted by your state leaders. You’re paying $0 for primary care visits and certain mental health visits, $0 for prenatal and postnatal care, and you don’t have to meet your deductible first.

On average, enrollees in these plans pay an estimated $14 to $33 less a month in premiums than people in comparable plans, and their annual out-of-pocket spending has fallen about 15 percent while holding steady for everyone else on the marketplace. 

Colorado didn’t build a government insurance company, rather, it designed the plan itself, down to the copays, and then required private insurers to sell it alongside their own.

A public health insurance option was supposed to be part of the Affordable Care Act. President Barack Obama supported the idea throughout his time in office, endorsing a government plan that could, in his words, “keep insurance companies honest” by giving them a government-backed competitor. But the idea was stripped from the bill before passage, after it became clear Senate leaders couldn’t get garner enough votes. Joe Biden campaigned for president on reviving a public option in 2020, but he never prioritized it once in office, and the progressive activists who championed it under Obama largely turned their sights to single-payer health care, which would cover all Americans.

The problems a public option was intended to address — access, costs, reliability — have still not gone away and a growing number of policy wonks and elected officials have started to ask if the idea deserves a spot again on the national agenda. 

Healthcare costs are soaring, and voters tell pollsters it’s among their top economic concerns. Medicaid work requirements are set to take effect in January, which could leave millions of low-income Americans uncovered, and private insurers have asked to raise ACA marketplace premiums by a median of 15 percent next year, after a roughly 20 percent hike in 2026. Two-thirds of adults say they favor a national government health plan, and polls suggest most voters imagine proposals like Medicare-for-all as a competitor to private insurance, rather than a systemwide replacement.

While the debate around public options stalled in Congress, three states have gone ahead and built their own. Washington state launched a public option in 2021, Colorado in 2023, and Nevada earlier this year. They all built on a provision of the Affordable Care Act that lets states apply to run their own version of the law — one Sen. Bernie Sanders fought for in the hopes that Vermont would use it to build a single-payer system.

Their experience also shows the challenges involved: Not only in overcoming political objections from competing insurers, but medical providers as well, who may have to accept lower payments in order to keep the public option’s premiums affordable.

Colorado leaders say this push to control costs was critical to their success.

“The driving point behind what we were doing was to set hospital prices,” said Michael Conway, Colorado’s insurance commissioner and an architect behind the program. “That was what we were driving towards and that’s what we did.”

It’s not clear if other states, or the federal government, will be willing to pick those kinds of fights with the broader medical industry. But if ever there was a time for it to happen it would be now, with affordability a massive political issue, and the public seemingly eager for serious action on health care. Just as the ACA began with a state-level experiment in Massachusetts, the success or failure of these early public-option states could presage much bigger changes nationally.

What Colorado did

The motivation behind the public option in Colorado was simple enough: Healthcare was simply becoming too expensive.

Dylan Roberts, the Colorado state senator who sponsored the bill, represents mountain counties that had some of the highest individual-market premiums in the United States.

“Back then, the top issue on the minds of my constituents was the cost of healthcare and the cost of health insurance,” Roberts told the Century Foundation, which interviewed the officials and advocates behind the Washington and Colorado programs for a report last year.

Colorado Gov. Jared Polis made the issue a priority as well. One of his first acts in office was creating an Office of Saving People Money on Healthcare, run out of his lieutenant governor’s office.

When the state finally moved, it moved against unified opposition. Hospitals and insurers were lined up against essentially everything public officials proposed. Roberts described the opponents as “basically anybody in the status quo health care industry” — meaning insurers, doctors, hospitals, and pharmaceutical companies.

Colorado first introduced a bill for a state-run insurance plan, where the state itself would sell coverage. This is the kind of arrangement closest to Obama’s ACA vision, and what most people think of when they hear “public option.” 

“It was really in large part to scare the bejesus out of the insurance companies that we were going to really come in and truly be a state-run competitor against them,” Conway, the state’s insurance commissioner, said last month at a panel in Washington, DC.

But then in 2021, when Colorado officials mapped out what building a state-operated insurance company would involve, they concluded that a state-run plan would not have been able to sell a single policy until 2025 or 2026.

Officials decided that was too long given the urgent need, so they rewrote the bill before it passed, requiring the insurers already operating in Colorado to sell a marketplace plan the state would design. This coverage launched in 2023.

“We would just be starting today if we actually truly stood up a public option,” Conway said on the late September panel. He thinks this is what the federal debate around a public option keeps getting wrong. “People want action now. They’re pissed off, they’re hurting. … They don’t have four years to wait.”

Importantly, while hospitals in Colorado were not mandated to participate, the state gave itself the power to force them. Colorado gave private insurers a target: By 2025, the state-designed plans had to cost 15 percent less than that insurer’s plans had cost in 2021, adjusted for inflation. How they got there was up to them, but an insurer can only squeeze its own profits and overhead so far. So the rest effectively had to come out of the costs insurers paid to hospitals. And if an insurer missed the target, the commissioner could haul both the insurer and the hospitals responsible into a public hearing to defend their prices — and then order the hospitals to take less.

That threat of a hearing was a powerful enforcement mechanism. “No one wants to be called in front of a public hearing where press are going to be there,” Kyla Hoskins, Colorado’s deputy insurance commissioner, told the Century Foundation. The hospitals cared about that more than the insurers did, according to Conway. The state launched complaints against nearly every carrier in the individual market and then pulled hospitals in with them. After that, according to Adam Fox of the Colorado Consumer Health Initiative, the price negotiations started happening, meaning no enforcement hearing actually took place.

Doctors complained early, but Conway said hospitals were the harder fight. The state worried that a single large hospital system refusing to participate could sink the entire plan, but in the end, no hospital refused. 

The result is the Colorado Option, a standardized plan that every insurance company in the state’s individual and small-group markets has to sell. There are 36 of these plans on the individual market for 2026. 

And people are choosing it. Enrollment went from about 14 percent of the state marketplace’s customers in 2023, the first year, to a third in 2024, to roughly half today.

Researchers at Brown University found the savings weren’t limited to the public option. Across Colorado’s individual market, the cheapest silver plans — a benchmark middle-tier ACA plan — now cost more than $100 a month less than equivalent plans in similar states.

Not everyone is celebrating Colorado’s policy development. Two industry-funded groups, the Partnership for America’s Health Care Future and its state affiliate Colorado’s Health Care Future, have campaigned against the program for years, citing a 10 percent rise in individual market premiums in its first year, and a 2024 report they commissioned from Hoover Institution researchers, which estimated Coloradans in public option plans collectively paid $13.3 million more in 2023 than if they had chosen the cheapest nonpublic options plans. 

Andrew Shermeyer, a doctoral candidate in health policy at the University of Minnesota, found the program made coverage cheaper for people receiving federal subsidies but more expensive for those who don’t. Hoskins, who oversees the program, disputed that, pointing to the Brown analysis finding premiums fell across the state, including on private plans.

Cara Welch, a spokesperson for the Colorado Hospital Association, pointed to the looming Medicaid cuts with HR 1. “Public option plans that would further weaken the healthcare system and shut doors to care are the wrong solution,” she told me.

How the public option died in 2009, and where it went

While states are working to implement their own public options, a national version would still have to overcome the same barriers it faced the last time it was tried.

The original idea for a national public option was a government-run insurance plan that would be sold on the new Obamacare exchanges, next to the private plans. 

Jeanne Lambrew, who worked on the Affordable Care Act in the Obama administration and now directs health care reform at the Century Foundation, said on the DC panel that there were several reasons that made that particularly hard at the time, and that she doesn’t think those reasons have been resolved. 

The first challenge was determining who would end up in the plan, because if sick and expensive patients concentrated in the public option, then it would cost too much to run. But if sick people were concentrated in private plans instead, that could also make it too expensive for those insurers and they could pull out of the market. Something like that second scenario, what economists call “adverse selection,” played out in the early years of Obamacare, when insurers raised prices and pulled out of unprofitable areas, leaving some counties on the brink of having no insurer at all.

The second challenge Lambrew outlined is whether doctors and hospitals would take the public plan, and what they would get paid. In 2009 Democrats pitched participation in a public option as voluntary, which was a problem because it meant that in order to induce the most desirable doctors or the hospital everyone wants, the government would have to pay them high enough rates — which would make the savings effectively disappear. 

The third challenge was whether a government agency would sell insurance directly, or whether private companies would sell a plan the government designed, as Colorado later decided to do. 

While the public option was ultimately cut from the Affordable Care Act, what survived was a provision letting states apply for federal waivers to try their own designs, so long as coverage stayed as broad and affordable and didn’t cost the federal government more. 

That provision’s biggest champion was Sanders, who wanted Vermont to use it to build the first single-payer system in the country. Though Vermont tried and gave up in 2014, the clause instead became a legal opening for Washington, Colorado, and Nevada to later use. So although the ACA didn’t include a public option, Lambrew emphasized, it still built the path to the ones that exist now.

Washington state went first, passing its law in 2019, and made the opposite choice from Colorado on hospital mandates. Instead Washington asked hospitals to participate voluntarily, and many unsurprisingly didn’t. In the first year the plan was sold in 19 of the state’s 39 counties, cost about 11 percent more than the cheapest comparable plan, and drew roughly 1 percent of enrollees.

So the legislature went back and passed a second law in 2021, this time requiring hospitals to contract with at least one public option plan if one made them an offer. The requirement took effect for 2023, and enrollment has climbed every year since. By 2025 the plan was available in every county in the state. About 115,000 people signed up for a public option plan for 2026, or roughly 40 percent of Washington’s marketplace.

Nevada’s plans went on sale this year, and the state gave itself the least leverage of the three. It sets premium targets but cannot set hospital rates, and it suspended its provider participation requirement for the program’s first year. Enrollment has come in below projections. “The story is unfinished here,” Lambrew said of Nevada.

Taking the public option national

The hospital industry uses the plight of rural hospitals, which are often struggling financially, to argue against public options or the government getting involved more generally to lower costs. 

Healthcare reformers tend to respond by exempting rural hospitals from price caps, though Conway, Colorado’s insurance commissioner, says that is a mistake. Rural hospitals are generally paid far less by private insurers than large systems are, and at the price levels under discussion, he said, a cap would actually represent a raise for most of them. Tell a rural hospital it will get three times what Medicare pays and “they would think you were the savior,” he stressed.

Conway has been getting a lot of calls from other states interested in adopting what they’ve done. But in every conversation he’s blunt with the person on the phone, saying they’d have to be prepared to take on hospital prices. “When I bring that up with other states, the appetite isn’t there right now,” he said on the September panel.

Conway blames Medicaid cuts for the reticence. The Congressional Budget Office estimates 7.5 million Americans will lose their health insurance by 2034, and states bracing for that are not eager to pick fights with hospitals at the same time. Undoing those Medicaid cuts, Conway said, is “an incredibly important floor” and “the foundation to actually doing anything else past that.”

The federal government does have one tool that Colorado and other states lack: a public insurance program that already exists. Hannah Garden-Monheit, a former Federal Trade Commission official on the healthcare panel, pointed out that Medicare, unlike a private insurer, is “a price setter, not a price taker.” Meaning it can announce what it will pay rather than negotiate for it. Some public option proposals in Congress would let people buy into Medicaid through the marketplace, or create a new plan that pays what Medicare pays, instead of building something from scratch. 

Roberts, who sponsored the Colorado bill, told the Century Foundation that the goal should be saving customers money, getting more people insured, and getting them the care they need. He said what the public program “actually looks like at the end of the day doesn’t matter as much as the outcomes of the product that people have.”

Laura Kate Zaichkin, who runs competition and affordability at Washington’s exchange, says the path to a workable public option might not be easy, but the rewards are worth it.  

“It takes a lot of political will, collaboration with partners, thoughtful design and implementation,’ she told the Nation’s Health. “It is a long-term investment that states can make to lower healthcare premium costs.”

With Democrats potentially set to expand their statehouse presence after the midterms, there may be more room to act on healthcare in other states next year. Even if Democrats don’t end up enacting a public option at the federal level, they could boost states in their efforts by restoring Medicaid funding, which could give lawmakers more room to stand up to health providers on costs. If these public options continue to grow, they might end up an unexpected ACA legacy.