By: Madeline O’Brien
This open enrollment period, Washington State residents can once again purchase first-in-the-nation “public option style” plans, with more options and more affordable premiums than in the program’s freshman year. In their first year, Washington’s publicly procured plans, touted as a mechanism to improve affordability and competition in the marketplace, were less available and more expensive than proponents had hoped. For the program’s sophomore outing, the plans will offer average rate decreases and be offered in a greater number of counties than in 2021, an encouraging sign for the viability of public option plans as an accessible, affordable option for consumers.
The first year of Washington’s public option was complicated by higher-than-expected prices and limited availability
In 2019, Washington became the first state to enact a public option-style law. Known as “Cascade Select,” public option plans are required to meet certain standards set by the state, including a requirement to cap aggregate provider reimbursement at 160 percent of Medicare. This cap was projected to reduce premiums by 5-10 percent. At the same time, public option plans are subject to standardized cost-sharing requirements that also apply to some non-public option marketplace plans.
In a disappointment to the program’s architects, the first year the public option plans were available – 2021 – their premiums were as much as 34 percent higher than traditional plans in the state’s largest county, and public option plans were offered in less than half of all counties. At the end of the 2021 open enrollment period, only 2.5 percent of new enrollees selected public option plans. The plans’ limited availability and higher prices were attributed to two primary factors: (1) the unwillingness of many providers to agree to reduced reimbursement rates and (2) the plans’ more generous benefit designs, with lower enrollee cost-sharing compared to many traditional plans.
The challenges of the first year of the public option rollout led the legislature to take additional action to bolster the availability and affordability of public option plans. In 2021, the legislature passed a bill that will require certain hospitals to contract with public option plans in counties that did not have a public option plan available in the previous plan year (and gives the Washington Health Care Authority, a state agency, the authority to enforce this requirement via fines and contract actions). The new legislation also establishes state-funded financial assistance for consumers enrolled in silver and gold standard plans (including public option plans), and directs state officials to study the public option’s impact. These policies go into effect in 2023, and the impact study will begin once public option enrollment exceeds 10,000 covered lives.
Increased availability and more competitive pricing for Washington’s public option plans in 2022
Even before the new legislative fixes kick in, Washington’s public option plans will be available in more counties and at lower cost to consumers in 2022. Public option plans will be available in 25 counties, up from 19 counties in 2021, and premiums will be on average 5 percent lower in 2022 than 2021, compared to a 3 percent year-over-year increase in non-public option standardized benefit plans and a 5 percent increase in non-standardized plans. Even so, in King County, where Seattle is located, public option Bronze plans will still be 2 percent more expensive than the lowest non-standard Bronze plan. However, three out of five public option carriers expanded their public option service areas, and multiple carriers report that the public option is their lowest priced plan in several counties.
It is unclear what specific factors played a role in improving the availability and affordability of public option plans in 2022. Marketplace officials have suggested that insurers priced the new products conservatively in their first year, and lowered them later in 2022 to become more competitive. It is also possible that the American Rescue Plan (ARP) played a role; Washington had 28,000 new marketplace signups in the open enrollment period following the ARP’s expansion of marketplace subsidies, and the more generous standardized plans (including public option plans) now make up 22 percent of plan selections, up from 18 percent prior to ARP implementation. However, the state has not yet released data about enrollment changes in the public option plans alone, information that could help illuminate the impact of the ARP’s subsidy enhancements on public option take-up.
Washington still has work to do to meet consumers’ need for affordable, adequate insurance coverage
The positive trajectory of Washington’s public option plan suggests that program durability for these new products should not be defined by the first year. Even without the legislative fixes to Washington’s public option (which do not go into effect until 2023), the state-procured plans became cheaper and more widely available in 2022. Interviews with insurers and providers could provide more insight into specific factors that contributed to lower rates, but the data show that the limited availability and high costs from the first year of implementation may reflect early growing pains and are not necessarily indicia of fundamental programmatic flaws.
However, these positive developments do not negate the need for data-driven policy changes to improve the market, which will be key moving forward into 2023 and beyond. Cascade public option plans are still not available statewide. It remains to be seen whether the new provider participation incentives will make it easier for the plans to expand into new service areas. Furthermore, while the ARP premium subsidy enhancements may have made the more generous public option plans more attractive to subsidized enrollees, those subsidies are slated to expire at the end of 2022 (although Congress is debating a bill to extend them through 2025). A legislative directive to explore a Section 1332 waiver under the Affordable Care Act (ACA) to fund additional state financial assistance, increase access to marketplace plans, and initiate or expand other programs to improve health insurance affordability and access suggests the state could soon take additional action to strengthen its public option initiative.
Washington’s experience is an encouraging and informative development for other states
As the first state to enact a public option-style plan, other states may be looking to Washington as they develop their own public options. Colorado and Nevada, two states that recently enacted public option initiatives, learned from Washington’s experience and included premium affordability targets and provider participation requirements in their plans. States pursuing public options should be heartened by the progress that Washington has made in improving affordability and access, but would do well to take note of the challenges they have faced achieving the program’s goals.