Washington state could make health coverage more affordable 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 a report from the state’s Office of the Insurance Commissioner (OIC).
The report used state-specific claims and spending data to evaluate how each policy could be implemented and the estimated impact on costs. Insurance Commissioner Mike Kreidler noted that while the state has improved access to health care, affordability remains an issue.
“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 report from AM Best.
A reinsurance program for individual and small group plans would cover “some or all” high-cost claims based on specific conditions, individuals, or total claim costs. This program could reduce premiums by 10% but would need significant state funding. It would affect between 292,000 and 344,700 residents.
The report also suggested raising the minimum medical loss ratio (MLR) standard to 88% for all commercial health plans, which could lower premiums by 0.9% to 2.5% for up to 1.6 million residents.
MLR standards require health insurers to spend a minimum portion of collected premiums on medical care or quality improvements. The current standard is 80% for individual and small group plans and 85% for large group markets.
Additionally, the report recommended reference-based pricing, which ties care prices to specific levels, such as a percentage of Medicare reimbursement rates. Setting a cap at 160% of Medicare reimbursement rates could reduce health care spending by 3% to 19% annually, although implementation would be complex.
The report also examined hospital global budgeting, where hospitals receive a fixed amount for all services provided annually. This system aims to shift away from practices encouraged by fee-for-service reimbursement, such as increasing the volume and intensity of services. Global budgeting could cut hospital costs by up to 7.1% but would have significant implementation expenses.
Finally, the report considered requiring health care costs to meet benchmarks set by the state’s Health Care Cost Transparency Board. Currently, meeting these benchmarks is voluntary.
Mandatory benchmarks could save $1.4 billion to $1.9 billion annually, but enforcement mechanisms would be necessary for success.
A spokesperson for the Association of Washington Healthcare Plans said the organization is reviewing the report but appreciates the regulator's efforts to provide objective data to policymakers on these complex issues.
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