Washington to offer first ‘public option’ insurance in US

Associated Press

SEATTLE

Washington is set to become the first state to enter the private health insurance market with a universally available public option.

A set of tiered public plans will cover standard services and are expected to be up to 10 percent cheaper than comparable private insurance, thanks in part to savings from a cap on rates paid to providers. But unlike existing government-managed plans, Washington’s public plans are set to be available to all residents regardless of income by 2021.

The Legislature approved the plan last month, and Gov. Jay Inslee is scheduled to sign it into law today.

The move thrusts Washington into the national debate over the government’s role in health care, with a hybrid model that puts the state to the left of market-only approaches but stops short of a completely public system.

Instead, the state will dictate the terms of the public option plans but hire private insurance companies to administer them, saving the state from having to create a new bureaucracy – and guaranteeing a role for the insurance industry in managing the new public option.

Lawmakers in at least eight other states including Colorado and New Mexico have proposed their own public-option measures. So far none have passed legislation implementing a public option.

Backers acknowledge the rate caps at the heart of the plan risk creating coverage gaps in rural areas. But they hope to persuade doctors to accept lower rates by bringing the state’s purchasing power to bear. The savings would be used to sell the plans at a competitive price.

Inslee, who is also running for president, embraced the idea based on early work by a state legislator and later officially requested the public option bill.

Its sponsor, Seattle Sen. David Frockt, a Democrat, said the hybrid system was a compromise.

“What’s important about this plan is that the government is coming in and taking a more aggressive role in regulating the cost drivers of health care,” Frockt said.

The core proposition of Washington’s plan, dubbed Cascade Care, is that it will save consumers money by capping payments to doctors, hospitals and other health care providers.

The cost cap is central to the program’s long-term survival: Set it too high, and there will be no savings to pass along. Set it too low, and the state runs the risk of providers declining the plan, leaving it to whither as consumers seek alternatives that provide more choice, said Jennifer Tolbert, director of the Kaiser Foundation’s state health care analysis program.

The question is critical in Washington’s rural counties, many of which were already hit hardest by health care cost increases.

To attract providers, Washington lawmakers chose a relatively high figure to start: The plan caps payouts at 160 percent of federal Medicare rates.

That’s more than other states have proposed. In New Mexico, lawmakers considered using Medicaid rates, among the lowest paid to doctors and hospitals by any insurance plan.