Summary of Washington State’s Public Option Law
In May 2019, Washington state became the first in the nation to enact a public option law (Senate Bill 5526) to offer Washingtonians more affordable, high-value coverage options in the state’s individual health insurance market by 2021. While not a true public option, in which the state government would administer the program and bear the financial risk of covering health care costs, this “Cascade Care” program will create a public-private system whereby the state sets payment parameters to control costs and private health insurers administer the plans and bear the financial risk.
Additionally, the legislation requires standardized plan designs for each of the Bronze, Silver, and Gold tiers of coverage in the Washington Exchange aimed at lowering out-of-pocket costs and making comparing plans easier. Public option plans must qualify as standardized plans. The law also requires the state to develop a plan to expand the availability of premium subsidies by raising the cap on eligibility from 400 to 500 percent of the federal poverty level by November 15, 2020.
Plan Design and Requirements
SB 5526 requires the Health Care Authority (the Authority), which administers Medicaid and other programs in the state, to contract with at least one insurer to offer a public option plan at each of the metal levels in at least one county in 2021. While the law states a goal of ensuring at least one of the plans is available in each county that year, the Authority is only obligated to stand up a plan in a single county.
Public option plans will be ACA-compliant qualified health plans (QHPs) that cover essential health benefits and meet certification requirements otherwise needed to be offered on the state’s Exchange. Going beyond the ACA’s base standard, the law requires public option plans to reduce cost barriers to maintaining and improving health and to encourage consumer choice based on value without leading to higher premiums.
Public option plans must also comply with more stringent standards that include increasing transparency, reducing administrative burden, and aligning with state value-based purchasing models. The details of these requirements will need to be clarified through implementing regulations.
Provider Reimbursement and Participation
The bill sets the following terms to control costs:
Caps payment for health care services (excluding pharmacy benefits) at 160 percent of the total amount Medicare would have paid for the same services;
Imposes a floor rate of 101 percent of allowable costs under existing Federal programs (including Medicare) for qualified rural hospitals (this is the same policy applied by Medicare); and
Imposes a floor rate of 135 percent of the total amount Medicare would have paid for primary care services.
The overall cap on provider reimbursement may be lifted under three potential scenarios:
Doing so, by 2023 or later, would not increase premiums;
Doing so would prevent an insurer from forming an adequate provider network that ensures timely access to health care services; or
The insurer can achieve premiums that are 10 percent less than the previous plan year through other means.
The bill does not require providers to participate in the public option plan. It also prohibits insurers who offer such a plan from requiring providers to accept the public option plan rates as a condition of participation in other plans offered by that insurer.
Reporting Requirements
The state Authority is required to submit several reports to the legislature regarding implementation of the public option program and exploring potential new features:
Due December 1, 2022 – (1) The impact of requiring plans that participate in state-run programs (i.e., state employee benefit plans, Medicaid) to offer public option plans; (2) the impact on the Exchange market of requiring providers who participate in state employee benefit plan or Medicaid, etc., to participate in public option plan networks; (3) whether the utilization review process adopted by public option plans should match clinical criteria adopted by the Authority; and (4) other issues deemed relevant to implementation of the bill;
Due December 1, 2023 – The impact of insurers only offering standardized health plans beginning in 2025 on consumers, with an analysis on consumer choice and affordability; and
Due annually – The number of health plans available in the Exchange in each county.