Summary of Washington’s New Cascade Care Legislation
The Washington State Legislature is considering new legislation (Senate Bill 5377) aimed at improving the affordability and stability of Cascade Care, the first state program to offer public option plans (i.e., Cascade Select). The bill reflects a more direct attempt to increase the availability of public option plans and to control health care costs, particularly through major policy changes to provider participation and reimbursement. Additionally, the bill would establish a premium and cost-sharing subsidy program to compliment these new policy changes as well as the standards and guardrails for Cascade Care established by Senate Bill 5526. The bill would also direct the state to pursue a federal waiver, if appropriate, to unlock federal pass-through funding to help pay for the new premium and cost-sharing subsidy program.
On March 2, 2021, the Washington State Senate passed Senate Bill 5377 along party lines. The bill appears likely to be approved by the Democratic-controlled House this session and signed into law.
Provider and Carrier Participation
Currently, hospital and health care provider participation in Cascade Care is voluntary. The lack of a provider mandate, coupled with the required cost controls, appear to have limited provider participation in public option plans. In 2021, public option plans are available in only 19 of Washington State’s 39 counties, while standard plans (i.e., Cascade plans) are available in all counties. As of January 28, among the 222,731 individuals that purchased coverage on the Exchange, approximately six percent (1,872 individuals) selected a public option plan and approximately 18 percent (33,142) selected a standard plan.
In an effort to increase the availability of public option plans, participation would become mandatory for hospitals in large systems. Senate Bill 5537 would require a hospital system with at least four licensed hospitals to join the network of at least two public option plans in each county in which the system has at least one licensed hospital. A hospital would only be required to contract with two public option plans if it receives an offer from at least two health carriers. If a hospital receives only one offer from a carrier, then that hospital is required to only contract with that single public option plan. Negotiations over their participation would be prohibited from influencing negotiations regarding participation in other non-public option plans.
Under Senate Bill 5537, insurance carrier participation would remain optional. However, the new mandate for hospitals in large systems to participate would likely provide carriers some leverage in negotiating rates. Additionally, the bill would establish a new limit on the number of nonstandardized health plans that a carrier can offer. This language is likely intended to encourage carriers to offer public option plans and standard plans and increase overall competition. Beginning in 2023, in each county where the carrier offers a qualified health plan, the bill would allow a carrier to offer up to two nonstandardized gold health plans, two nonstandardized bronze health plans, one nonstandardized silver health plans, one nonstandardized platinum health plan, and one nonstandardized catastrophic health plan.
Provider Reimbursement
Additionally, the bill seeks to reduce premiums by more stringently regulating provider reimbursement. Under current law, reimbursement for health care services (excluding pharmacy benefits) are capped at an aggregate 160 percent of Medicare. Beginning in 2023, HCA has the authority to waive the cap if HCA “determines that select contracting will result in actuarially sound premium rates that are no greater than the qualified health plan’s previous plan year rates adjusted for inflation using the consumer price index.” Senate Bill 5537 would remove HCA’s authority to waive the 160 percent cap in 2023 and beyond.
The new bill does not make any changes to the terms for critical access hospitals and sole community hospitals (reimbursed at no less than 101 percent of Medicare) and primary care services (reimbursed at no less than 135 percent of Medicare).
Qualified Health Plan Requirements
Senate Bill 5537 would establish a new requirement for qualified health plans to provide cost and quality of care information and data to HCA upon request. Qualified health plans would also be prohibited from entering into an agreement with a provider or third party that restricts the qualified health plan from providing this information or data.
Overall, the bill maintains the same requirements established in Senate Bill 5526 for qualified health plans – e.g., be a standardized health plan, meet national accreditation standards, and comply with statutory reimbursement rates for select services. The bill also reiterates previously established requirements regarding the design of standardized health plans.
Premium and Cost-Sharing Subsidy Program
Senate Bill 5537 also applies a more targeted approach to lowering health care costs for consumers. The bill would establish premium and cost-sharing subsidy program to be administered by the Exchange. The Washington State Legislature would need to appropriate funds in separate legislation in order to implement the program.
The bill seeks to employ findings from a report on the impact of a state subsidy program designed to limit spending on health insurance premiums to no more than ten percent for individuals with an income at or below 500 percent of the federal poverty level (FPL). The report was mandated by Senate Bill 5526.
Among the various premium subsidy scenarios examined, the Exchange recommended a $200 million state subsidy program that provides a fixed subsidy at $135 per month. The Wakley Consulting Group, contracted to conduct the actuarial analysis, estimates that the fixed subsidy would result in nearly 24,000 individuals currently uninsured individuals purchasing coverage on the individual market. Among consumers with an income below 500 percent of FPL, 94 percent of that market would spend less than 10 percent of their incomes on premiums for plans purchased on the Exchange.
The Exchange notes that a state-based cost-sharing reduction subsidy could be provided along with the premium subsidy to consumers that face high out-of-pocket costs, such as older individuals and individuals with severe or chronic illnesses. All carriers operating on the Exchange would be required to accept the new premium or cost-sharing assistance.
An individual would be eligible for premium assistance and cost-sharing reductions if the individual:
Is a Washington State resident;
Has an income up to 500 percent of FPL, or a lower income threshold if not enough funding is appropriated in the subsequent legislation;
Is enrolled in a silver or gold standardized health plan (i.e., public option plans or standard plans);
Applies for and receives all federal advance premium tax credits if eligible;
Applies for and receives all cost-sharing reductions if eligible; and
Is ineligible for Medicare or Medicaid; or
Meets alternate eligibility criteria established in subsequent appropriations legislation.
To provide some economic relief amid the COVID-19 pandemic, advance premium tax credits are temporarily available, for 2021 and 2022, to individuals with an income above 400 percent of FPL, the eligibility cutoff established in the Affordable Care Act (ACA). Over the two-year period, advance premium tax credits are also more generous across income levels and premiums are capped at 8.5 percent of income. Eligible individuals will be required to contribute less of their income towards premiums. Congressional Democrats in the 117th Congress are expected to pursue legislation to make these policy changes permanent.
The availability of additional federal premium assistance on a permanent basis for a larger segment of the individual market would likely have consequential implications for consumers at the state level. The federal government would pay for a larger portion of premiums in the individual market. Depending on the timing of successful federal action, Washington state policymakers may have to revisit the purpose and design of the premium and cost-sharing subsidy program in Senate Bill 5377. Absent federal action, the eligibility criteria for and generosity of advance premium tax credits will revert to the sliding scale and methodology established by the ACA. In Table 1, we delineate the maximum threshold for premium assistance eligibility and premium contributions at the federal level and as proposed by Senate Bill 5377 in Washington State.
Federal Waivers
The bill would require the Exchange, in consultation with the Health Care Authority (HCA) and the insurance commissioner, to “explore all opportunities” to apply for a federal waiver to garner pass-through funding to help pay for the new premium and cost-sharing subsidy program or otherwise improve access to and affordability of coverage. State officials would be required to apply for a federal waiver if an opportunity were identified. Washington State could apply for a section 1332 waiver to increase premium subsidy eligibility to individuals up to 500 percent of FPL.
New Reporting Requirements
The bill would require new studies and amend existing reporting requirements to understand the impact of the modified public option program and the new premium and cost-sharing subsidy program.
Hospital Financial Sustainability (Due December 1st of Plan Year) – Requires the Exchange, in consultation with HCA and the insurance commissioner, to analyze the impact of public option rates for in-network services on the financial outlook of participating hospitals.
Consumer Benefits and Costs (Due December 1st of Plan Year) – Requires the Health Care Cost Transparency Board to analyze the effect of public option plans on consumers by comparing the benefits and cost-sharing requirements for consumers enrolled in public option plan to those for consumers enrolled in other standardized and nonstandardized qualified health plans.
Consumer Choice and Affordability (Due December 1, 2023) – In the statutorily mandated report on the impact of only offering standardized health plans beginning in 2025, requires the Exchange, in consultation with HCA and the insurance commissioner, to include an analysis on the impact of offering a bronze standardized high deductible health plan compatible with a health savings account, and a gold standardized health plan closer to actuarial value to the silver standardized plan.