Washington Public Option: Hardball ends up being softball, but at least it's being thrown over the plate.

Washington PlanFinder

Two months ago, I noted that the Washington state legislature had decided to beef up their quasi-Public Option law to make the PO plans (called "Cascade Select") more robust and less expensive:

Let's step back a moment: There's actually up to three types of policies being offered depending on the carrier:

  • Qualified Health Plans (QHPs)...these are the normal policies which comply with ACA regulations offered by most carriers.
  • Cascade (Standard)...these are QHPs which also follow another state law passed last year (see below), and
  • Cascade (Select)...these are Standardized QHPs which are also public option plans.

Here's the distinction between Cascade "standard" and Cascade "select":

SB 5526 also established standardized plans, which are statutorily required to adhere to plan designs finalized by the HBE. These plans offer lower deductibles, more services available before the deductible, and more transparent cost-sharing. Standardized plans must also allow consumers to easily compare plans by premium, network, quality, and customer service. Public option plans are required to be standardized plans and must comply with additional standards that include increasing transparency, reducing administrative burden, and aligning with state value-based purchasing models.

As I noted at the time, only 1,872 of WA's 223,000 total enrollees actually selected the "Cascade Select" plans, though it's more reasonable to say that 1,114 new enrollees selected them out of 44,000 new enrollees total, or around 2.5%.

I noted four main reasons for the low initial signup rate:

  • Price: One of the biggest selling points of both the Public Option and Single Payer (Medicare for All) at the federal level has always been that it would lead to dramatic price drops in insurance premiums and out of pocket expenses compared to private insurance...but the reality is that the vast bulk of the cost of health insurance is dependent on how much healthcare providers charge. Even if you run an insurance company as a non-profit with minimal overhead expenses, that doesn't necessarily change how much hospitals, doctors, drug companies and medical device makers charge for their services/products. The PO plans were originally supposed to only pay providers Medicare rates, but the final bill ended up being set at 160% of Medicare...
  • Availability: While other Cascade Care plans are currently available in all 39 WA counties, the Cascade Select plans (PO) are only available in 19 of them. The counties in question only represent around 66% of the total state population: Adams, Asotin, Benton, Chelan, Clallam, Douglas, Grant, Jefferson, King, Kitsap, Kittitas, Klickitat, Lincoln, Mason, Okanogan, Pierce, Spokane, Whitman and Yakima Counties...
  • Timing: The negotiations between the state, the carriers administering the new plans and the healthcare providers were going on last spring...which is to say, right in the middle of the initial wave of the Coronavirus pandemic. Needless to say, most healthcare providers probably weren't really in the mood to talk about entering into a whole new type of insurance contract arrangement. They were...a little preoccupied with this looming threat to their capacity and bottom line.
  • Prioritization: I also delved into just how the various plans are being promoted on the WA Planfinder website, and noticed that while "Cascade Care" plans are listed prominently by default, "Cascade Select" (the PO options) don't show up until #31 (at least in Seattle), which is obviously connected to the "price" item above...and if you sort by "Star Rating" (an overall ranking of the quality of networks, customer service, etc) the PO plans don't show up until #60, several pages in...because one of the only two carriers even offering the PO plans is brand new to the state, and therefore doesn't have any history to compare quality against.

I then noted that the WA legislature was putting together a "Cascade Care 2.0" bill (SB 5377) to try and resolve some of the initial trouble spots...including one hell of a crackdown:

Public Option Participation and Reimbursement. Beginning in plan year 2022, at the request of a public option plan, an ambulatory surgical facility or a hospital that receives payment for services provided to enrollees in Public Employees Benefits Board, School Employees Benefits Board, or Medicaid, must contract with the public option plan to provide in-network services to enrollees of that plan.

As I noted two months ago:

Dammmn. This legislation has some serious teeth--the state is basically requiring large chunks of hospitals throughout the state to accept Cascade Select (PO) plans if they accept Medicaid or any public employee policy, including teachers and other school administrators.

In addition:

A hospital reimbursement rate formula is established for inpatient and outpatient hospital services provided to enrollees of a public option plan on or after January 1, 2023. The rate formula must be based on a percentage of the Medicare reimbursement rates, with the base reimbursement rate for hospitals not exceeding 135 percent of the amount Medicare would have reimbursed the hospital. The reimbursement rate may be adjusted as follows:

  • a hospital with a percentage of medicaid patients that exceeds the statewide average must receive up to a five point increase in its base reimbursement rate, with the actual increase to be determined based on the hospital's percentage share of medicaid patients; and
  • a hospital that is efficient in managing the underlying cost of care, factoring the hospital's total margins, operating costs, and net patient revenue, must receive up to a five point increase in its base reimbursement rate.

And even more:

By December 1, 2022, HCA, in collaboration with the Exchange, must establish the hospital reimbursement rate in rule. HCA may adopt rules to ensure compliance with participation and reimbursement requirements and may take action against a hospital or ambulatory surgical facility that fails to comply with the requirements.

By December 15, 2024, HCA, in consultation with the Health Care Cost Transparency Board and the Exchange, must submit a report to the Legislature with recommendations on any adjustments to the base reimbursement rate or other factors to be considered in the hospital reimbursement rate formula.

HCA's authority to waive the 160 percent of Medicare reimbursement benchmark requirement if it determines selective contracting will result in actuarially sound premium rates that are no greater than the plan's previous plan year rates, is repealed.

The original bill would also have beefed up the use of standardized plans, a key step towards reducing consumer confusion and discouraging "Silver Spamming" as David Anderson calls it:

Cost and Quality of Care Data Collection. At the request of HCA or the Exchange, for monitoring, enforcement, or program and quality improvement activities, a public option plan must provide cost and quality of care information and data to HCA and the Exchange, and may not enter into an agreement with a provider or third party that would restrict the provision of this data. All submitted data is exempt from public disclosure.

Standardized and Non-Standardized Plans. Any carrier offering a QHP on the Exchange must offer the silver and gold standardized plans designed by the Exchange and if a carrier offers a bronze plan, it must offer the bronze standardized plans designed by the Exchange.

Beginning January 1, 2023, a health plan offering a standardized health plan on the Exchange may also offer up to one non-standardized bronze, silver, and gold plan.

Two months ago, I concluded that...

It'll be interesting to see whether this bill makes it all the way through to the Governor's desk, and how much it gets changed along the way. In addition, of course, if #HR369 (the federal bill to #KillTheCliff & #UpTheSubs) goes through, that could impact the "up to 500% FPL subsidy enhancement" portion considerably, though it would probably just be redirected towards cost sharing instead.

Well, sure enough, as of yesterday, SB-5377 did indeed made it through both the Washington state Senate and House, and yes, there are some significant changes in the final product:

The first section keeps the addition of state-based premium subsidy enhancements for ACA exchange enrollees earning up to 500% FPL, which has taken on a twist give the passage of the American Rescue Plan's expanded/enhanced subsidies since the prior version of the bill:

To be eligible for the program, an individual must:

  • be a resident of the state;
  • have an income up to 500 percent of the federal poverty level or a lower level determined in the budget;
  • be enrolled in a silver or gold standardized plan offered in their county;
  • apply for and accept all advanced premium tax credits for which they are eligible;
  • be ineligible for minimum essential coverage through Medicare, Medicaid, or Compact of Free Association islander premium assistance; and
  • meet other criteria established by the Exchange.

There's two changes here: First, the income threshold has gone from 500% FPL to 500% "or a lower level", which is kind of interesting. This suggests that they may end up shifting from the 400-500% FPL range to more of a Vermont/Massachusetts-style goal of focusing on lower-income enrollees (probably the 200-300% range, I'd imagine).

Second, the extra subsidies used to be available for the lowest-priced Bronze, Silver or Gold subsidized plans; now they'll be available for Silver or Gold only, but any of them, not just the lowest-priced variants (this makes sense, really...it encourages more comprehensive coverage and ensures that the Cascade Select plans are eligible for subsidies even if their list price isn't the lowest around).

As for the Cascade Select/Cascade Care section...well, that's where the sausage-making gets really obvious.

Here's the original description again:

Public Option Participation and Reimbursement. Beginning in plan year 2022, at the request of a public option plan, an ambulatory surgical facility or a hospital that receives payment for services provided to enrollees in Public Employees Benefits Board, School Employees Benefits Board, or Medicaid, must contract with the public option plan to provide in-network services to enrollees of that plan.

Here's the final version:

Public Option Participation and Reimbursement. Beginning in plan year 2022, hospital systems that own or operate four or more hospitals in the state must contract with at least two public option plans of the hospital's choosing in each geographic rating area in which the hospital system operates a hospital. A hospital system is not required to comply with the contracting requirement in a county unless it receives offers to contract from at least two carriers, and if the hospital only receives one offer, it is only required to contract with one plan.

It no longer requires large swaths (or even small swaths) of state employees to use the PO...it puts the onus of accepting the PO on hospital systems instead...except it doesn't even require all hospitals to do so, just systems which own/operate "four or more" statewide. I have no idea how many hospital systems there are in Washington State, nor how many hospitals are owned by each of them.

If WA has a heavily-consolidated hospital system, this could be pretty effective (and might even discourage further consolidation, which is actually a good thing for other reasons, ironically). If few systems own more than 3 hospitals, however, this could make mandatory participation pretty scattershot. I assume someone who knows more about the situation in Washington State can set me straight on this.

It's further weakened by the fact that the hospital has to receive offers for the contract from the carriers, which I kind of assumed would be required already given that the state is supposedly calling the shots on the Cascade Select plans in the first place...but I guess not?

What about this part?

A hospital reimbursement rate formula is established for inpatient and outpatient hospital services provided to enrollees of a public option plan on or after January 1, 2023. The rate formula must be based on a percentage of the Medicare reimbursement rates, with the base reimbursement rate for hospitals not exceeding 135 percent of the amount Medicare would have reimbursed the hospital. The reimbursement rate may be adjusted as follows:

  • a hospital with a percentage of medicaid patients that exceeds the statewide average must receive up to a five point increase in its base reimbursement rate, with the actual increase to be determined based on the hospital's percentage share of medicaid patients; and
  • a hospital that is efficient in managing the underlying cost of care, factoring the hospital's total margins, operating costs, and net patient revenue, must receive up to a five point increase in its base reimbursement rate.

As far as I can tell, this entire section has been removed entirely.

So much for cutting reimbursement rates from 160% of Medicare back down to 135%.

Moving on...there's one item which did make the final cut:

HCA's authority to waive the 160 percent of Medicare reimbursement benchmark requirement if it determines selective contracting will result in actuarially sound premium rates that are no greater than the plan's previous plan year rates, is repealed.

If I'm reading this correctly, it means that at least 160% of Medicare really is the ceiling going forward, so at least there's that.

Original:

Cost and Quality of Care Data Collection.
At the request of HCA or the Exchange, for monitoring, enforcement, or program and quality improvement activities, a public option plan must provide cost and quality of care information and data to HCA and the Exchange, and may not enter into an agreement with a provider or third party that would restrict the provision of this data. All submitted data is exempt from public disclosure.

Final:

Cost and Quality of Care Data Collection.
At the request of HCA, for monitoring, enforcement, or program and quality improvement activities, a public option plan must provide cost and quality of care information and data to HCA, and may not enter into an agreement with a provider or third party that would restrict the provision of this data. All submitted data is exempt from public disclosure.

Basically, the final version of the bill requires this data be provided to the state health department but not necessarily to the WA Health Benefit Exchange itself. Huh.

Standardized and Non-Standardized Plans.
Any carrier offering a QHP on the Exchange must offer the silver and gold standardized plans designed by the Exchange and if a carrier offers a bronze plan, it must offer the bronze standardized plans designed by the Exchange.

Beginning January 1, 2023, a health plan offering a standardized health plan on the Exchange may also offer up to one non-standardized bronze, silver, and gold plan.

Final:

Standardized and Non-Standardized Plans.
Any carrier offering a QHP on the Exchange must offer the silver and gold standardized plans designed by the Exchange and if a carrier offers a bronze plan, it must offer the bronze standardized plans designed by the Exchange.

Beginning January 1, 2023, a health plan offering a standardized health plan on the Exchange may also offer up to two gold, two bronze, one silver, one platinum, and one catastrophic non-standardized health plan in each county where the carrier offers qualified health plans.

In the 2023 study on the impact of standardized health plans, the Exchange must include an analysis of offering a bronze standardized high deductible health plan compatible with a health savings account, and a gold standardized health plan closer in actuarial value to the silver standardized health plan.

Ugh. This is also a backtrack from standardized plan requirements, which they should be moving towards, not away from.

In summary, unless I'm missing something or misreading the final version:

  • Original: All public employee groups have to use a PO plan;
    • Final: Now it's just certain hospital systems which have to accept PO plans (and not even all of them)
  • Original: Hospital reimbursement rates from the PO are reduced from 160% of Medicare down to 135%, with some exceptions
    • Final: Never mind. 160% it is.
  • Original: Hospitals are limited to no more than 160%, period.
    • Final: This one made the cut, yay!
  • Original: Both the health authority and the exchange get to look at all the data.
    • Final: Just the health authority, not the exchange.
  • Original: Carriers can offer up to 1 non-standard Bronze, Silver and Gold plan starting in 2023
    • Final: Carriers can offer up to 2 Bronze, Silver or Gold plans, plus a non-standard Platinum & Catastrophic plan starting in 2023.
    • Final: The exchange also has to run studies on standardized HSA plans

Of all the changes above, I like a couple of them, but most of them weaken the original bill, which I guess shouldn't surprise me. Ah, well. The large hospital system and 160% cut-off requirements are moves in the right direction, at least.