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WA nears a first: Offering a public option for health insurance

Lawmakers have already moved to protect people with pre-existing conditions. Now they may make Washington the first state to offer a public health care option.

The Capitol campus in Olympia, April 2, 2019. (Photo by Matt M. McKnight/Crosscut)

On multiple fronts, the state of Washington is fighting back against the federal government’s efforts to erode the Affordable Care Act. Earlier this month, Democratic Gov. Jay Inslee signed a bill that will have the state adopt some of the protections included in former President Barack Obama’s health care law, such as ensuring people with pre-existing medical conditions can still access health insurance.

Now, with only a few days to go in the current state legislative session, lawmakers are on the verge of passing another health care bill, one that Inslee says would make Washington the first state in the nation to provide a “public option” for health care coverage.

The legislation, Senate Bill 5526, would direct the state to contract with insurers to provide standardized health care plans on the individual market, with the state capping reimbursement rates to help rein in costs.

It’s a policy that Inslee, a governor in his second term, has highlighted as a demonstration of Washington state’s progressive leadership, as he campaigns to become the nation's next president.

“I am very hopeful that this can be an example for the rest of the country,” Inslee said during a televised CNN town hall earlier this month.

Yet organizations representing hospitals, businesses and doctors in Washington are among those opposing the bill, saying it hasn’t fully been vetted. The Washington State Medical Association, a physicians group, says the plan also fails to address all the drivers of high health care premiums, including administrative and pharmaceutical costs.

State Sen. David Frockt, D-Seattle and the prime sponsor of the legislation in the Senate, said the bill is “an effort to stand up and improve aspects of the Affordable Care Act and the individual market, which is not working for many people.”

About 4 percent of the state’s insurance customers, or about 253,000 people, buy health insurance on the individual market, mostly via a state-run exchange. The remainder largely receive insurance through an employer or other means.

But plans offered on the state exchange — a marketplace populated with private insurers — have experienced double-digit premium increases each of the past few years, including an average increase of nearly 14 percent in 2019.

Jason McGill, the governor’s health policy adviser, attributed some of those rising costs to efforts by congressional Republicans and President Donald Trump to roll back the ACA. He said those federal actions have included Congress' repealing the ACA’s individual mandate, which imposed a tax penalty on those who didn’t have health insurance, as well as the current administration’s decision to end cost-sharing subsidies paid to insurance companies.

Still, the proposal sought by Inslee stops short of the single-payer or Medicare for All approach supported by some other Democratic presidential candidates, including Sens. Bernie Sanders, Kamala Harris, Kirsten Gillibrand, and Elizabeth Warren.

Instead, the Washington proposal — dubbed Cascade Care — would keep private insurers as a central part of the health care system.

Primarily, the bill aims to offer lower-cost health insurance options by getting the state involved in setting reimbursement rates between insurance companies and medical providers. For the public-option plans, the state would limit reimbursement rates to 150 percent of the total amount that Medicare would have reimbursed for the same or similar services.

State Rep. Eileen Cody, D-Seattle, said the public-option plans should save consumers between 5 percent and 10 percent on premiums compared to what they otherwise would pay on the exchange, while helping combat future rate increases. She expects the bill would provide similar savings even if its reimbursement rate rises slightly, a change that is likely to happen during final negotiations.

Under the public-option proposal, the state-procured plans would be available starting in 2021.

“It will bring down the cost, and bring a better benefit package,” said Cody, who sponsored the bill in the House.

Beyond that, the legislation would set new standardization rules for insurance plans. Cody said those provisions are aimed at making sure customers don’t get stuck with health insurance that has such a high deductible that they never use it.

McGill, the governor’s policy adviser, said offering state-procured plans would also help avoid some Washington counties having only a single insurer — or none at all — for customers to choose from on the individual market. Right now, 14 of the state’s 39 counties have only one insurer participating on the state exchange, he said.

Yet Sean Graham, a lobbyist for the Washington State Medical Association, questioned whether the bill offers what most people would consider a true public option. 

“I do think it’s fair to say that a public option implies public investment, and there are no public funds that are being utilized to help address affordability in this plan,” Graham said.

For the moment, the bill wouldn’t increase government subsidies that help people afford health insurance, though it would direct the state’s insurance exchange to develop a plan to do so in the future.

“The only subsidy, as it were, that is associated with the plan is from artificially reducing the reimbursement to physicians and health care facilities," Graham said.

Members of the medical association, which represents physicians across the state, have warned they will not participate in the public-option plans given how the bill is currently structured, Graham said. He said that could mean that patients using the state-procured plans “will have a very limited access to care.”

In addition to the medical association, the Association of Washington Business, the Washington State Hospital Association and Kaiser Permanente signed a letter asking the Legislature to not pass the bill this year, arguing it needs more work.

Some leading Republicans in the Legislature are opposing the measure as well. Senate Minority Leader Mark Schoesler, R-Ritzville, said he wants less government involvement in health care, not more.

“It’s just an incremental move to socialism,” Schoesler said of the governor’s public-option plan.

Different versions of the measure have passed both chambers of the Legislature, but the House and Senate still need to negotiate the final language. A conference committee is working on that in the coming days, before the Legislature’s 105-day session is slated to end on Sunday.

Already, Democrats in Olympia have had some success in passing other health care legislation. The bill Inslee signed into law last week, House Bill 1870, would ensure that state law includes many of the consumer protections passed under the ACA, so those provisions would remain in effect even if Trump or Congress succeed at repealing the law at the federal level. Those protections include a ban on insurers denying coverage to people with pre-existing conditions, as well as prohibiting lifetime limits on coverage.

Another health care measure that has passed the Senate, but has failed to receive a vote in the House, would set up a group to explore establishing a universal health care system in Washington.

State Sen. Emily Randall, D-Bremerton and the sponsor of that plan, SB 5822, said she supports moving toward universal health care in Washington state. So does Frockt, the Senate sponsor of the public-option bill, who has worked on universal health care measures in the past.

Both lawmakers, however, said they see the public-option bill as a practical improvement they can pass today, while overhauling the state’s health care delivery system could take years.

“We need both Cascade Care now, and we need to look at our whole system and continue to make innovations,” Randall said. 

Randall said the governor’s Cascade Care bill “could be a step toward universal health care.”

Lawmakers are in the midst of negotiating a new two-year budget, but have yet to announce a deal. While both the state House and state Senate are controlled by Democrats, leaders in each chamber released substantially different spending proposals in recent weeks.

Should those budget negotiations drag on and require a 30-day overtime session, lawmakers might get additional time to negotiate the health care bills.

Otherwise, they would need to wrap up the health care talks by Sunday. Barring that, Inslee’s public-option bill would most likely have to wait until next year.

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WA nears a first: Offering a public option for health insurance

About the Authors & Contributors

Melissa Santos

Melissa Santos is Crosscut’s staff reporter covering state politics and the Legislature.