WASHINGTON
Washington Commissioner: Reinsurance Program Would Boost Health Coverage Affordability
OLYMPIA, Wash. //BestWire// - Washington can improve the affordability of health coverage in the state by creating a reinsurance program for individual and small group plans, increasing the minimum medical loss ratio standard and using reference-based pricing, according to an affordability report from the state’s Office of the Insurance Commissioner.
The report leveraged state-specific claims and spending data to determine how each policy could be implemented and the estimated impact they would have on costs, according to OIC. Insurance Commissioner Mike Kreidler said that while the state made strides in improving access to health care, affordability issues persist.
“It’s clear from this report that we can make a difference and start tackling the underlying costs of health care that we’ve been battling for too long,” Kreidler said in a statement.
The report said a reinsurance program for individual and small group plans would be used to pay “some or all” high-cost claims based on either specific condition, the individual or total claim costs. The reinsurance program could potentially reduce premiums by 10%, but would require significant state funding. Between 292,000 and 344,700 residents would be affected by the reinsurance program.
OIC also said increasing the minimum medical loss ratio standard to 88% for all commercial health plans could reduce premiums by 0.9% to 2.5% for as many as 1.6 million residents. Medical loss ratios require health insurers to spend a minimum amount of collected premiums on medical care or quality improvements, according to the study’s fact sheet. Currently, the MLR standard is set at 80% for individual and small group plans and 85% for large group markets.
Further, the report suggests using reference-based pricing, which ties prices for care to defined levels such as a percentage of Medicare reimbursement rates. The report looked at setting a cap of 160% of Medicare reimbursement rates, and found this could reduce health care spending by 3% to 19% annually. However, it would be a complex endeavor to implement and operate.
The report also looked at hospital global budgeting and how it would impact costs. The idea here is that hospitals get a predetermined, fixed amount for all services provided in a given year. This is done to incentivize a shift away from practices like increase volume and intensity of services provided, which can be encouraged by fee-for-service reimbursement, OIC said.
Global budgeting could reduce hospital costs by as much as 7.1%, according to the report, which said it would have significant implementation costs.
Finally, OIC looked at requiring health care costs to meet benchmarks set by the state’s Health Care Cost Transparency Board. Currently, meeting the benchmarks is voluntary. Annual savings could range from $1.4 billion to $1.9 billion, but the report said requiring companies to meet benchmarks would likely fail without an enforcement mechanism.
A spokesperson with the Association of Washington Healthcare Plans said the organization is still reviewing the report, but is pleased the regulator is working to provide objective data to policymakers on these complex issues.
“A wide range of factors drive the cost of health care for everyone in Washington state: Everything from prescription drug and emergency room costs to regulatory and policy decisions,” the spokesperson said in an emailed statement. “Given such diverse cost drivers, changes will be needed to manage costs in all parts of the health care system.”
In other Washington state news, voters will head to the polls on Aug 6. to decide who will replace Kreidler, who is not seeking reelection after serving as commissioner for more than 20 years (BestWire, Aug. 2, 2024).
(By Steve Hallo, senior associate editor, BestWire: Steve.Hallo@ambest.com)