State Public Option Act
The State Public Option Act would create a Medicaid-based “buy-in” option that states can offer to their residents as a public option for health insurance. Starting in 2026, eligible individuals in participating states could enroll in Medicaid coverage via the state’s Exchange (the ACA marketplace) and pay premiums and cost-sharing for that coverage, subject to specific limits. The federal government would subsidize the program heavily through an enhanced federal matching approach for administration, with premium and cost-sharing revenues offset against medical assistance costs. The bill also expands eligibility mechanics, adds a premium tax-credit process for those in the buy-in, and requires the state to treat Medicaid buy-in coverage as eligible for cost-sharing reductions and to align enrollment with Exchange periods. In addition, the bill includes a package of reforms to primary care payment (a Medicare-like floor for certain primary care services under Medicaid and broader provider eligibility), increases FMAP for newly eligible individuals, and expands Medicaid coverage of comprehensive sexual and reproductive health services (including abortion) starting in 2026. The act also directs HHS to review and update Medicaid quality measures for the buy-in population and to fund state implementation.
Key Points
- 1Establishes a State Public Option by allowing residents of a state to buy into Medicaid coverage through the state's ACA Exchange, beginning January 1, 2026, under a new eligibility category (XXIV) for “Previously Undescribed Individuals.”
- 2Financing and administration: provides a 90% enhanced federal match for administrative expenses related to running the Medicaid buy-in; allows the state to collect premiums and cost-sharing, and requires a portion of premium revenues to be accounted for and offset against Medicaid expenditures; gives the state authority to offer premium tax credits and cost-sharing reductions to these enrollees through the federal tax system.
- 3Premiums and cost-sharing: caps annual premiums at 8.5% of a family’s income for those in the buy-in; cost-sharing limits and reductions mirror ACA rules, with enrollment treated as coverage under a silver-level QHP for premium credits and cost-sharing reductions.
- 4Enrollment and state role: states electing this option must offer enrollment through their ACA Exchange and may align enrollment periods with ACA timelines; the state agency administering the buy-in can act as the issuer for cost-sharing reductions.
- 5Quality and implementation: requires HHS to review and update Medicaid quality measures for the buy-in population by 2030 and to assist states with implementation; provides $50 million in 2026 for these activities.
- 6Primary care payment reform: renews and strengthens a Medicare-like payment floor for primary care services under Medicaid, expands the set of providers who must be paid at or above this floor (including family medicine, internal medicine, pediatrics, OB/GYN, nurse practitioners, physician assistants, CNMs, etc.), and requires accountability and documentation in value-based arrangements.
- 7Provider payments and managed care: updates to ensure managed care contracts support the primary care payment floor and related quality requirements.
- 8Increased FMAP for newly eligible individuals: expands the period and calculation for higher federal matching funds as states begin providing Medicaid to newly eligible enrollees.
- 9Expanded coverage of sexual and reproductive health care: requires inclusion of comprehensive sexual and reproductive health services (including abortion) as medical assistance under Medicaid for the buy-in population; requires state plan approvals to reflect this coverage; sets implementation timing for these changes to apply to services furnished on/after January 1, 2026.
- 10Conforming amendments: makes numerous adjustments in the Social Security Act to incorporate the new eligibility category, funding flows, and coverage rules.