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Washington Governor Pushes State-Run Health Insurance Plan

Jan. 09, 2019 1:47PM

  • State-run proposal pegged to Medicare, would offer pre-set benefits
  • Goal is to stabilize individual markets allegedly undercut by Trump administration
Bloomberg Law News Jan 20, 2019
Jan 9, 2019
  •  State-run proposal pegged to Medicare, would offer pre-set benefits
  •  Goal is to stabilize individual markets allegedly undercut by Trump administration

Washington Gov. Jay Inslee (D) wants to create a state-sponsored health insurance plan in response to Trump administration actions that he says have undermined the individual market.

The proposal, which would include a pre-determined set of benefits and Medicare-level reimbursements for doctors, will be introduced in the Democrat-majority Legislature when it convenes later this month. The plan has support from relevant committee leaders, a sign it could pass easily.

Inslee, who is considering a 2020 run for president, declared the plan a “significant step to the goal of universal coverage in the state of Washington.”

“Universal coverage” would mean health insurance for all residents through a state-sponsored or “public option” plan, commercial plans, or a mix of the two. Universal coverage would likely include a mandate that everyone has some form of coverage and it would also require substantial government subsidies.

“We are at the knife’s edge,” said Inslee at a Jan. 8 press conference. Fourteen 14 counties are in jeopardy of losing all coverage because insurers are unwilling to offer coverage there.

Answer to Trump

Inslee’s plan, dubbed Cascade Care, would be offered on the state’s Obamacare exchange with the goal of bringing down premiums and out-of-pocket costs to consumers. Without an insurance mandate and more subsidies, it doesn’t get to universal coverage, but Inslee sees it as a step in that direction.

Similar plans to greatly expand health coverage are being considered in California and New York City.

Supporters say the plan is a Democratic answer to the Trump administration’s policies to unwind Obamacare, such as eliminating the mandate requiring people to have insurance and ending payments to insurers to cover beneficiaries with greater health-care needs.

“What this bill is intended to do is shore up all of the things the Trump administration has done to undermine the individual market,” said state Sen. David Frockt (D), who will sponsor the bill and is on the health-care committee.

Frockt acknowledged that insurance carriers will have concerns “about a public competitor coming into their space.” They made the same argument when Obamacare was being debated in Congress, and lawmakers eventually dropped the “public option” provision.

States seeking to sponsor universal would likely would be be required to get waivers from the Department of Health and Human Services. Depending on how sweeping their proposed changes are, they also may need a nod from Congress.

Inslee’s plan doesn’t get all the way to universal coverage, but Frockt told Bloomberg Law it’s “doable at the moment in this current political environment.”

“There’s no way you can do state-based universal coverage immediately when the Trump administration is saying they would never grant the waivers,” he said.

Lower Costs

Jason McGill, Inslee’s health-care policy adviser, said standardized benefits and Medicare rates would lower costs for insurance carriers. That would translate to lower out-of-pocket costs to consumers. Using state standards that emphasize paying for quality of care rather than quantity of care would also bring down costs.

But paying Medicare rates also means doctors and hospitals would get less money than if they were reimbursed at commercial insurance rates.

“We are deeply concerned with this particular proposal pegging physician and provider reimbursement rates to Medicare. Medicare rates, put really simply, are artificially low, arbitrary, and subject to the political whims of Washington,” Jennifer Hanscom, CEO of the Washington State Medical Association told Bloomberg Law.

Undercutting Commercial Carriers

“Pegging rates to Medicare pretty much guarantees that many of the physician practices in our state won’t be able to serve patients,” Hanscom said.

To illustrate, she said that the average commercial payment for a routine office followup visit is $102, while Medicare pays $73.64. The cost to the doctor to provide that service is about $66.

Aimed at Obamacare Shoppers

McGill said the state plan, offered along with those of commercial insurance companies, would be available for anyone shopping on the Obamacare exchange, which is called Washington Healthplanfinder.

Low-income and middle income people on the exchange are currently eligible for federal subsidies, and they could use them to buy the state-sponsored plan.

Washington Healthplanfinder CEO Pam MacEwan told Bloomberg Law that the plan would be administered by an insurance company that bids for the job.

Asked if such a company would be undercutting its own business, MacEwan said: “That’s the concern. However if they could have better provider payment schedules and have an easier time with provider contracting, it would be easier for them to put together their networks and plan products. The Medicare fee schedule is lower than what they are currently paying.”

“We have to do something,” MacEwan said. “We have customers who are paying a high premium every month plus a $6,000 deductible. They can’t afford it.”

The standardized plans should help reduce deductibles, she said. And if the program works as intended, it should also bring down the cost of premiums for all individual coverage.

To contact the reporter on this story: Paul Shukovsky in Seattle at pshukovsky@bloomberglaw.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com

Paul Shukovsky

Staff Correspondent