Washington State: Details emerge on the much-anticipated Public Option plan

Thanks to Louise Norris for the heads up on this.

Over a year ago, the Washington State legislature passed (and Gov. Inslee signed) a bill to create, for the first time, a state-based Public Option healthcare plan for the individual market. As I noted at the time, there's a few important caveats which illustrate again just how difficult it is to make major overhauls to the healthcare system, even at the state level:

• First, again, this will be for the individual market only (that is, the ACA exchanges for people who don't have healthcare coverage via Medicaid, Medicare or their employer)

• Second, after initially proposing to only reimburse healthcare providers at Medicare rates (which is a critical component of actually lowering healthcare costs), the final version of the bill ends up paying them up to 160% of Medicare rates...and includes the option of increasing them beyond that starting in 2023 under certain circumstances.

• Third, it's still not technically a fully "public option", as it will still be operated by a private insurance carrier contracted by the state. However, the plan design, including network, reimbursement rates etc. are all controlled by the state government. In practice it sounds more like a managed Medicaid situation in some ways.

Last December, more information came out on the new plans, called "Cascade Care":

• The Exchange will be working on marketing materials and outreach for Cascade Care informed by focus groups and testing with a goal to develop tools and materials for consumers that will help them in selecting the best plan among their available options based on factors that are important to the consumer –such as, cost, network, customer service, and quality;

• The Health Care Authority will be initiating a procurement process of public option plans in early 2020. Public option plans are qualified health plans that have a standard benefit design with additional affordability, quality and value requirements; and

• The Office of Insurance Commissioner will publish filing instructions in spring 2020.

Cascade Care creates new health care coverage options that will be available through Washington Healthplanfinder beginning November 1, 2020 for coverage effective January 1, 2021.

Last week, the Public Option Institute published detailed information about where Cascade Care will be available in 2021, what the premiums will look like and so forth:

On Thursday, July 2, 2020, the Washington Health Care Authority (HCA) announced that five insurance carriers (of the 15 health insurers that filed 2021 rates for individual health plans) are apparently successful bidders (ASBs) for the Cascade Care public option:

• Bridgespan Health Company
• Community Health Network of Washington
• Coordinated Care Corporation
• LifeWise Health Plan
• UnitedHealthcare of Oregon

Notably, Community Health Network of Washington and United Healthcare of Oregon did not participate in 2020 and will only offer the public option.

HCA notes that the ASB’s proposed coverage plan includes “nearly every Washington county.” In the coming months, the Office of the Insurance Commissioner (OIC) will review and approve the health plan filings and the HCA will execute contract negotiations and final review. The Washington Health Benefit Exchange (HBE) Board of Directors is also expected to certify the plan offerings by September.

This is actually surprising to me--I assumed that there'd be a single carrier which won the bid for the entire state which would be competing with the private carrier offerings from competitors, but apparently any carrier can offer the PO as well as their own plans, which is interesting. I have no idea whether that's a better or worse setup.

In any event, it looks like the breakout will be:

• 2 carriers: off-exchange only, private only
• 3 carriers: on & off-exchange, private & public
• 2 carriers: on-exchange only, public only
• 8 carriers: on & off-exchange, private only

There's some more interesting details in the POI report as well:

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.

This is basically #16 on my "If I Ran the Zoo" wish list, and it's already the law in several states like California and Massachusetts. My only beef is that the standardized designs are still optional for non-public option plans, which partly defeats the purpose (HealthCare.Gov had a similar model for a couple of years called the "Simple Choice" option, but they seem to have abandoned that last year).

They note that Cascade Care will, unfortunately, not be available in every county in 2021; it looks like it'll be in 20 out of 39 counties for the moment:

As illustrated in the table below, the ASBs are offering the public option plan in select counties – leaving out 19 counties, including all five counties in rating area 8. Whereas, six counties (Adams, Garfield, Kittitas, Pierce, Whitman, and Yakima) will be able to choose a public option plan from multiple carriers, pending HCA approval. Adams and Kittitas will each have three carriers offering Cascade Care, while Garfield, Pierce, and Whitman will each have two carriers. One public option plan will be available in King County, which includes Seattle.

Finally, we get to the key question: How much will these policies cost enrollees (at full, unsubsidized prices, anyway)?

Overall, standardized public option plans (SP) are not necessarily the least expensive plan option in comparison to standardized non-public option plans (SN) and non-standardized plans (NS). Non-standardized plans were generally the least expensive options with carriers’ average silver-level premiums ranging from $532.78 to $681.24.

Monthly premiums for silver-level public option plans, on average, range from $558.23 to $680.42. The table below details the average monthly premiums provided in the proposed rate filings for 2021.

This is something I've been warning about for awhile now. Just because a healthcare plan is "public" doesn't necessarily mean it's less expensive if it has to pay healthcare providers comparable rates to what private carriers pay.

Once the final version of the bill jumped from 100% Medicare rates to 160%, it became clear that full-price premiums would only be perhaps 5-10% lower than average private premiums at best.

Don't get me wrong...this is still an important step forward, because at the very least it gets a foot in the door for true competition with the private industry...it just isn't the panacea which some unrealistically expected:

The variation in plan premiums may indicate a convergence of several factors, including competition at the county level, the coverage mandates that apply to SP and SN plans (but not NS plans), and provider participation. The required cost controls on provider reimbursement, coupled with the lack of a provider mandate, appear to limit provider participation in public option plans. 

In other words, when you put a cap on how much you'll pay doctors/hospitals but don't require them to participate, a lot of them aren't gonna do so.

Affordability implications of public option plans vary at the county level. In counties where there is only one other standardized plan available in addition to a public option plan, public option plan premiums are the lowest available (see, e.g., Clallam and Cowlitz County in Appendix A). This remains true in some counties where plan competition is only slightly less limited (i.e., only three plans including a public option plan; see, e.g., Douglas and Okanogan County).

THIS is the true strength of a Public Option: Not that it's gonna be dramatically lower-cost, just that it at least prevents the private carriers from taking advantage of the situation to price gouge.

However, in counties where there is greater plan competition, or where carriers offer standardized plans at competitive rates, public option plan premiums are often neither the most expensive nor most affordable (e.g., Asotin, Garfield, and Whitman County). In rare cases (e.g., King County) the public option plan offered is the most expensive of the five total plans available. In general, it appears that public option plans will provide the most cost relief in counties where competition is currently limited and where, perhaps as a result, premium prices are higher. 

Finally, it's also vitally important to keep in mind that these are all unsubsidized premiums. Over 60% of Washington State ACA enrollees are subsidized, and the subsidy formula is structured so that in some cases they may actually pay somewhat more than they otherwise would depending on the county, their income and their household makeup.