Governor Sisolak signed legislation last week that gives Nevada the authority to establish a public option that is intended to provide consumers with comprehensive, but lower cost health insurance. The second state to enact such a law (Washington was first in 2019), Nevada is tasked with creating state-designed coverage to be administered by private insurers that are required to reduce premiums by addressing high health care costs.
An Overview of the Basics
Nevada’s Senate Bill 420 directs the state’s Department of Health and Human Services (DHHS), the Division of Insurance (DOI), and the Silver State Health Insurance Exchange to design, establish, and operate a public option effective 2026.
The public option must meet criteria to be classified as a qualified health plan, which includes offering the essential health benefits and will be available to individuals and possibly to small employers and their employees. The public option will be sold through the state’s health insurance exchange and as a result must meet the silver and gold actuarial values (70 and 80 percent respectively).
Reference Based Premium is based on the lower of either:
- the premiums for the second lowest priced silver level plan sold on the exchange during the prior year or
- the premium for the second lowest cost silver plan sold on the exchange in 2024 and adjusted based on the Medicare Economic Index.
As one means to achieve affordability, until 2030, public option premiums in each zip code must be at least five percent lower than the reference premium for that zip code. In addition, the average public option premiums must be at least 15 percent lower than the average reference premium in the state. Lastly, premiums can’t increase by a percentage greater than the increase in the Medicare Economic Index (i.e., inflation) for that year.
To fund the public option, the law created the Public Option Trust Fund to be administered by the state treasurer. Important to the affordability of public option plans, the balance in the Public Option Trust Fund at the end of each fiscal year carries into the next fiscal year rather than reverting to State General Fund. As such, if the Treasurer deems that there are additional funds available for the fiscal year, these can be used to increase affordability of the plans (e.g., lower premiums). To start, the legislature appropriated $1,639,366 to the Public Option Trust Fund for use by June 2023, and appropriated relevant funds to DHHS and the Exchange.
The bill also directs DHHS, DOI, and the Exchange to apply for federal funding that may be available to help finance operation of the program (to be held in the Fund). Additionally, it directs the agencies to apply for any relevant federal waivers that may be necessary to implement the program, including 1115 demonstration and 1332 innovation waivers that can be used to secure federal insurance subsidies to purchase public option QHPs, as well as to combine the risk pools for the public option and Medicaid. The latter is contingent on analysis projecting that combining risk pools can lower costs. The law requires relevant agencies to apply for federal waivers by 2024 but to also conduct an actuarial study of the bill’s impact on premiums prior to applying.
Specifically, the legislature seeks to determine the impact of repealing one controversial component: requiring specific providers to participate in the public option networks.
Assuring Provider Participation
Nevada will conduct a statewide competitive bidding process for insurers to administer the public option and requires all managed care organizations contracted to deliver services for the states Childrens Health Insurance Program (CHIP) and Medicaid to submit a proposal.
The state aims to prioritize insurer applicants with networks that:
- align the providers across the public option and state Medicaid program,
- include rural and safety-net providers,
- strengthen the primary care and behavioral health workforce (particularly in rural areas),
- accept value-based payment models,
- decrease disparities in access and outcomes and provide culturally competent care.
Ultimately, DHHS is authorized to administer the public option if these goals cannot be accomplished by contracting with a private insurer.
Similar to the requirement of insurers, every provider that participates in Medicaid, provides care for enrollees of the state employee health plan, or provides care to injured workers who receive workers compensation must enroll as a participating provider in at least one network of providers established in the public option.
Addressing Health Care Costs
Recent research indicates that commercial insurers reimburse hospitals, on average, 247 percent of what Medicare pays for the exact same services. With an interest to contain rising health costs, a growing number of states are exploring policies to lower commercial reimbursement rates to be more in line with Medicare’s cost-based rates. For example, Washington’s public option legislation capped reimbursement rates to providers at 160 percent of Medicare, with a minimum reimbursement of 101 percent to rural hospitals and 135 percent to primary care providers.
However, Nevada’s law doesn’t set a specific rate or reimbursement cap. Instead, the law includes a provision that, in the aggregate, reimbursements by the public option must be comparable to, or “better than,” those paid by Medicare. The lack of specificity leaves room for interpretation and debate among stakeholders that will likely need to be addressed through regulation.
The enactment of Nevada’s public option provides a pathway to leverage its state-based exchange to further reduce the state’s uninsured rate while addressing health care costs by targeting reimbursements on hospitals’ costs more so than on its charges. As the price of care continues to rise, and the federal government explores a possible federal public option, state action to address health care costs continues to create meaningful change and serves as a laboratory for nationwide policy. As additional states pursue such policies, NASHP will continue to update its tracker of state legislative action to lower health system costs.
