Leveraging State Purchasing Power to Stabilize the Individual Insurance Market: Washington State Leads the Way
Washington state has enacted a groundbreaking law to help stabilize its individual insurance market and prevent “bare counties,” areas of the state without an insurance option on its exchange.
Sponsored by longtime National Academy for State Health Policy (NASHP) member, state Rep. Eileen Cody, HB 2408 requires insurance plans covering state or school employees to offer at least one silver and one gold plan on the Washington Health Benefit Exchange beginning in 2020. Because state and school employees work in every county of the state, by leveraging the procurements for insurers to serve those employees, the bill aims to assure statewide coverage.
The new law protects the distinct risk pools in the public and school employee plans by requiring that qualified health plans offered through the new program are self-supporting and that public and school employee insurance programs will not bear any of the actuarial risk or administrative costs of the program. This provision addressed concerns that the legislation might result in a program that pooled the new exchange enrollees with state or school employees and increase the costs of covering those employees. The new legislation provides a significant test of the efficacy of leveraging public purchasing tools.
“Washington state has been working for years to use our state-purchased health care to effectively improve the quality of care for all residents and businesses in the state,” explained Rep. Cody. “Using our purchasing power to ensure access for the entire state was a logical next step.”
Washington has the experience to test this innovation. For years, its public health insurance programs have closely collaborated and been co-located with the Washington State Health Care Authority (HCA), which administers both the state’s Medicaid program and the Public Employees’ Benefit Plan. A nine-member board currently approves contracts and benefits for public employees. Beginning in 2020, HCA will take on a similar responsibility for the School Employees Benefits Board, which will oversee plans for public school employees.
Because the new program will not be in place until 2020, the new law provides an immediate back-up plan through the Washington State Health Insurance Pool (WSHIP), an independent, non-profit health plan that serves as the state’s high-risk pool. Until Dec. 31, 2019, anyone unable to secure coverage in the individual market will be eligible to purchase coverage in the high-risk pool at discounted rates.
High-risk pools, by virtue of their enrollment, tend to charge very high premiums. The new bill provides subsidies, financed through WSHIP assessments, that will significantly reduce the cost of coverage for those earning less than 400 percent of the federal poverty level (FPL) based on a sliding scale. For example, those earning less than 400 percent of FPL will have 30 percent discounts on premiums while those earning 200 percent of FPL will have premiums discounted by 80 percent.
This provision expires Jan. 1, 2020, when new options become available through the public employee and school plans. However, there is no guarantee that WSHIP would qualify as an Affordable Care Act qualified health plan that can take advantage of the federal subsidies, making this a problematic long-term option. State officials report that the recent announcement by the insurance company Premera that it will offer coverage statewide in 2019 is expected to avoid the need to deploy WSHIP as a back-up plan.
Signed into law by Gov. Jay Inslee on March 22, 2018, Washington’s innovation comes at a critical time. States face uncertainty about proposed federal changes to ACA and the impact they could have on individual state markets. States are already confronting the elimination of the individual mandate and awaiting final action on Administration proposals to allow the sale of lower-cost, lower-benefit plans through association health plans and the extension of short-term duration plans.
Both of these plans would be exempt from many of the rules now in place in the market. Coupled with the elimination of the individual mandate, these changes could result in fewer younger, healthier people purchasing coverage in the regulated market. The result? Higher coverage costs would again raise the risk of insurers exiting the individual market and leaving consumers without affordable options. Washington’s program offers a model that could bring stability to the market and will be closely watched as a harbinger of new approaches states could take to maintain coverage in a changing marketplace.