Washington State made history recently with passage of Chapter 364 – a new law that is poised to revolutionize the state’s individual insurance market. The law takes a multi-pronged approach to its market redesign by:
- Creating a quasi-public option product for Washington’s individual market;
- Requiring standard plan design for plans sold on its exchange; and
- Developing a plan to implement and fund subsidies for individuals earning less than 500 percent of the federal poverty level (FPL).
Washington’s quasi-public option is the first-in-the-nation requirement that a state agency – Washington’s Health Care Authority (HCA) – contracts directly with at least one private insurance carrier to offer individual market coverage on the exchange. Through these contracts, the state will require health plans to meet a series of goals and requirements including:
- Reimbursements capped at 160 percent of Medicare rates;*
- Standard plan design (see details below);
- Population health improvement;
- Alignment with state value-based purchasing models; and
- Incorporation of recommendations from Washington’s Bree Collaborative, a multi-stakeholder group tasked with improving health care quality, outcomes and affordability, and the health technology assessment program.
The carrier that contracts to sell these plans must make the plans available in at least one county in the state, and must offer at least one bronze, one silver, and one gold value plan. The intent is that the quasi-public plans will cost less and be higher-value to entice consumers to purchase these plans.
The law also requires a new standard plan design for plans sold on the exchange. The requirement lays out many ambitious goals to achieve through standardized requirements, such as:
- Reduce deductibles;
- Make more services available without needing to meet the deductible;
- Maximize subsidies;
- Limit adverse premium impacts;
- Reduce barriers to maintain and improve health; and
- Encourage choice based on value.
Washington’s exchange is tasked with developing the specifics of the standard plan design, and has already convened a multi-stakeholder workgroup to inform that process. Beginning in 2021, any insurer that sells plans on the exchange must offer at least one standard silver and one standard gold plan. While insurers may sell non-standardized plans in addition to standard plans, no non-standard silver plan may be of lower value than the standard silver plan that is offered.
NASHP recently spoke with Washington Health Benefit Exchange Chief Executive Officer Pam MacEwan to learn more about what lies ahead in Washington.
What brought policymakers together to develop this law?
PM: A lot of what we see in health care is that there are challenges with reaching consensus on what the problems are. In this case, our premium increases [on the individual market] had been in the double digits. It was overwhelming our consumers who could not afford increases of up to 30 percent. Our legislators began hearing from their constituents. Our medical associations, hospitals, consumer groups were all starting to come together on this issue. The stories and data were compelling. It was clear that costs were unaffordable and that Washington was going to start losing any ground we had gained on reducing the uninsured.
We had explored options to lower premiums in the past, including reinsurance. While many stakeholders were on board with the concept of reinsurance [payments issued to insurers who have enrollment high-cost individuals] it was a challenge to come to agreement on how to finance the program. The policies passed this year do not require state funding and are expected to accomplish similar goals.
What did you hope to accomplish through the various components of this law?
PM: Our main drive was to do something that would have an effect on health care prices and affordability. There are three components that are important in the law 1) standardization of health plans sold on the exchange; 2) active purchasing of a state-procured health plan [the quasi-public option]; and 3) targeting elimination of the “subsidy cliff” by studying how we can further subsidize coverage for individuals earning up to 500 percent FPL.
Through our standard health plans we aim to address high deductibles that seem to be rising out-of-control. Consumers are spending a lot on their care, but perceive little value from their coverage. We see that consumers are confused about their health plans and do not always understand what is covered. Through the model we envision, consumers will have clear access to certain services before they hit their deductible, and there will be greater predictability of cost sharing. It is possible that this may not lead to reduced premiums, but we believe that consumers will perceive greater value from their health plans if they know they can access certain services before reaching their deductibles, or if they can obtain their generic prescriptions without a copay.
For the public option, we will be working with our Health Care Authority to develop plans that have a higher overall value, that use value-based purchasing, and that use evidence-based standards for care. Coupled with the reimbursement cap, we estimate premiums for these plans will be 5 to 10 percent lower than other plans, while also providing greater value for consumers.
Finally, the study on how to further subsidize coverage is an important piece of the law. It may be a challenge to get funding, but the information will be necessary for us to come to a consensus on how to address affordability concerns especially for those at the “subsidy cliff”, meaning individuals earning about 100 percent FPL who do not qualify for federal tax credits.
How were policymakers able to negotiate inclusion of a reimbursement cap as part of this law?
PM: Our providers were anxious about how the payment piece would work out. There are real concerns about pegging reimbursements to a federal benchmark, it sets up a perceived slippery slope of payments potentially decreasing. Under this bill, negotiations started to set the rate at 100 percent of Medicare payments. This gradually increased until we reached agreement at 160 percent. For reference, we estimate that reimbursements for our exchange plans currently average at about 174 percent of Medicare.
Data was especially important. Data from our all-payer claims database (APCD) gave us an idea of what hospital payments across our state were, not just in the exchange but in other markets, including our state employee plans. This gave us a rough idea of what we wanted to shoot for.
How does the law address concerns about reimbursements to high-cost, high-needs areas, like rural communities?
The law includes some added protections for our rural communities, giving rural hospitals a payment bump.** We have also seen a benefit to those communities from the law we passed last year that requires insurers who offer plans to our state employees or teachers to also offer plans on the exchange. Coverage in rural areas is an issue, but that law pulled insurers into our rural communities. We are heading in the right direction. Our goal is not to harm rural providers.
What will be your process to develop the standard plan design envisioned by this law?
PM: We did a lot of work toward developing this last year. We convened a carrier workgroup to advise us on technical aspects like copayments, consumer behaviors, and cost-sharing considerations. We convened other stakeholders to focus more on the consumer issues, including medical providers and hospitals. We plan to work in close partnership with our insurance commissioner. Because they do final certification of health plans, we need to put forth policies that they will be able to quickly approve. We also benefit from learning from our peers — states like California and Massachusetts who have led on this issue.
The procurement process for the public option is uncharted territory for us. This is something that has not been done before and we want to be sure that our insurers and providers will be on board. We do believe we have insurers who are interested; we will be sure to engage our insurers throughout the process. We will be working in close partnership with the HCA, which brings a depth of knowledge from their experience contracting for Medicaid and the public employee health plan.
I am confident we will be able to meet the timelines to implement this all for the 2021 plan year but, as with anything new, there are always things you do not anticipate. We will keep up conversations and get the right people at the table to advise us along the way.
What advice would you offer other states exploring similar policies?
PM: Start early. You will need to work through the research and build consensus among your stakeholders to get something like this passed. You also need good leadership. We benefited from a strong chair of our House Committee on Health, Eileen Cody. She very much put her shoulder to the wheel to drive this forward.
Also, other states are further ahead on some of these policies. We have created relationships that help us build on best practices. There is a lot to learn from each other.
*The cap may be waived if a carrier is unable to meet network access standards required by the insurance commissioner or if a carrier can reduce premiums by 10 percent from the previous year.
**The law sets a threshold that payments to rural hospitals and critical access providers may not be less than 101 percent of allowable costs as defined by the Centers for Medicare & Medicaid Services. Payments to primary care providers may not be less than 135 percent of Medicare rates.