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Washington state’s newly launched public option can help assess potential reforms at the federal level or in other states.
While the Biden Administration has publicly supported a public option, competing priorities and the 50–50 balance in the Senate mean prospects to advance a federal public option are unclear. In the meantime, several states have taken action to advance variations of a public option.
One state, Washington, has launched its public option; Nevada and Colorado have passed legislation creating public options; and sixteen other states have announced as of this writing that they are considering various types of public options through legislation (Exhibit 1). Among the options that states are considering: new government-run plans; plans administered by private insurers with government-determined benefits and provider reimbursement rates; or allowing individuals of all incomes to “buy in” to Medicaid.
Washington State has recently implemented a public option. The Cascade Select program launched on January 1, 2021 and prompted two carriers to reenter a previously exited individual market. To help understand the potential premium implications of the Cascade Select public option—the first of its kind and a case study for similar plans in Nevada and Colorado—McKinsey & Company used publicly available information to analyze the premiums of each plan within Cascade Select and Washington’s broader Cascade Care program.
Exhibit 1: Map of states that have passed or are considering Medicaid buy-ins or other public option legislation
Sources: Simone S. Will State Public Options Deliver on Health Care Reform? The Grier Review; 2020 Jun 9;
Joel A., Kyla E. State Public Options: State of Play and Potential for Future Action. JD Supra; 2021 Apr 14;
Simrandeep K. States continue to explore a public-option plan to offer affordable healthcare. Decision Resources Group; 2019 Sept 3;
Abrams A. States Are Leading the Way on a Public Health Insurance Option. TIME; July 1, 2021;
Gilbert C. Environmental Scan: Cascade Care. Washington Health Benefit Exchange; July 15, 2020.
Program design: Since the implementation of the Cascade Care program, which includes Cascade Select, Washington’s state exchange now offers three categories of plans:
- Non-Cascade plans are typical commercial plans offered on Affordable Care Act individual market exchanges. As ACA plans, they are eligible for federal subsidies and must meet federal Qualified Health Plan requirements, including limits on actuarial values and out-of-pocket maximums (OOPMs).
- Cascade Care plans meet all ACA plan requirements and additionally have a standardized benefit design varying by metal tier, featuring lower deductibles and more services covered without cost-sharing. Every carrier offering any plans on Healthplanfinder, Washington’s state insurance exchange, is required to offer a Cascade Care gold and silver plan; any carrier offering a bronze plan also has to offer a Cascade Care bronze plan.
- Cascade Select plans, a subset of Cascade Care plans, share the standardized benefit design, including lower deductibles. They also cap aggregate provider reimbursement at 160 percent of Medicare rates, compared with an estimated average of 174 percent among other Washington exchange plans. (Early proposals would have set rates at 100 percent of Medicare rates.) Cascade Select plans are required to pay no less than 101 percent of allowable costs, as defined by the Centers for Medicare & Medicaid Services (CMS), to rural hospitals, and no less than 135 percent of Medicare rates for primary care services.
The legislation that enacted the state’s public option also requires the state Exchange in 2023 to submit a report to the legislature analyzing the impact of offering only Cascade Care plans on the exchanges starting in 2025.The report is required to include an analysis of how plan choice and affordability would be impacted for exchange consumers across the state, if the state were to go this route.
Exhibit 2: Washington Health Benefit Exchange description of Cascade Care elements
Source: Cascade Care. Washington Health Benefit Exchange; March, 2020.
Carrier participation: Five carriers contracted with Washington’s Health Care Authority to offer Cascade Select plans: BridgeSpan, Community Health Network of Washington, Coordinated Care, LifeWise, and UnitedHealthcare (UHG). Two of those payers, UnitedHealthcare and Community Health Network of Washington, had previously exited Washington’s individual market but reentered in 2021 to offer Cascade Select plans.
These payers’ reentry may suggest that a price-capped environment like Cascade Select’s, which decreases the importance of provider price negotiation, reduces barriers to entry. Under these conditions, insurers may need to differentiate themselves along dimensions other than price negotiations, including reduced premiums, improved customer experience, or greater network breadth relative to similar competitors.
We analyzed the plans offered by each county on Healthplanfinder to determine the number of Cascade Care non-Select (hereinafter referred to as “Cascade standard”) and Select plans in each of Washington’s counties. As illustrated in Exhibit 3, Cascade standard plans are offered in all 39 counties, and Cascade Select plans are available in 19 counties.
Exhibit 3: Cascade standard and Select plans offered by county
Sources: 2020 Qualified Health Plan and Qualified Dental Plan Certification Packet. Washington Health Benefit Exchange; Sept, 2019;
2021 Qualified Health Plan and Qualified Dental Plan Certification Requests. Washington Health Benefit Exchange; Sept, 2020.
Benefits: Using publicly available health benefit exchange data, we analyzed average deductibles, OOPMs, and copays offered by non-Cascade and Cascade Care plans. Consistent with their standardized benefit designs, all Cascade Care plans—including both standard and Select plans—had nearly identical cost-sharing requirements.[1]
Exhibit 4 shows that, compared with the average non-Cascade silver plans, Cascade Care silver plans had higher OOPMs, very similar copays, and lower deductibles ($2,000, compared with non-Cascade silver plan premiums of $4,286).
Cascade Care bronze plans had lower deductibles and higher OOPMs than the average non-Cascade bronze plan. Cascade Care gold plans had lower deductibles and OOPMs than the average non-Cascade gold plan.
Additionally, some non-Cascade plans structure cost-sharing requirements as coinsurance rather than co-pays; Cascade Care plans always use co-pays, which offer some predictability for consumers. For example, 51% of Bronze non-Cascade plans use coinsurance for a member’s first primary care physician visit while no Cascade plans do so.
Exhibit 4: Cost-sharing requirements among silver Healthplanfinder plans
Sources: 2020 Qualified Health Plan and Qualified Dental Plan Certification Packet. Washington Health Benefit Exchange; Sept, 2019;
2021 Qualified Health Plan and Qualified Dental Plan Certification Requests. Washington Health Benefit Exchange; Sept, 2020.
Premiums: Using publicly available information from Healthplanfinder, we compared prices across plan types in light of Cascade standard and Select’s lower deductibles and Cascade Select’s provider reimbursement rate cap. Prices were compared for a 27-year-old non-smoking individual without family or partner coverage.
Exhibit 5 shows how, on average, a Cascade standard silver plan was 12% more expensive than a non-Cascade silver plan, perhaps due to lower deductibles. Cascade Select silver plans had intermediate pricing, 7 percent below a Cascade standard plan—potentially driven by the reimbursement cap. Non-Cascade silver plans were 3.6 percent more expensive in 2021 than they were in 2020.
Among bronze plans, Cascade Select plans were the most expensive. Gold plans showed a pattern similar to silver plans.
Exhibit 5: Average monthly premiums, silver plans
Source: McKinsey & Company
Enrollment: In the first year of the program, as shown in Exhibit 6, roughly 40% of new enrollees chose a Cascade Care plan, including 2.5% who chose a Cascade Select plan. Among new enrollees, 16% chose a Cascade Care plan, including 0.8% who chose a Cascade Select plan. Enrollment was correlated with price, as it was higher in counties where the lowest-cost Cascade Select silver plan was close to the price of the benchmark plan. In counties where the premium difference was less than $30 per month, 2.9% of all enrollees chose a Cascade Select plan compared to 0.7% otherwise.3
Exhibit 6: Enrollment by plan type, 2021 – In the program’s first year, 37% of new enrollees chose a Cascade standard plan, and 2.5% chose a Cascade Select plan
Source: McKinsey & Company
Cascade Care 2.0: On May 10, 2021 Washington Governor Jay Inslee signed the “Cascade Care 2.0” bill into law which makes two meaningful changes to the existing program. First, to increase affordability for current and potential enrollees with lower incomes, it establishes a framework for state-based premium subsidies to supplement existing federal subsidies. State subsidies will be available starting in 2023 for Cascade Care enrollees below 250% of the federal poverty level. Second, to increase provider participation and options for enrollees, unless all counties in Washington have a Cascade Select plan available by plan year 2022, hospitals that accept Medicaid or public employee health benefits will be required to enter a network agreement with at least one Cascade Select plan. Legislators that supported the bill indicated that the increased state subsidies, combined with additional tax credits from the American Rescue Plan Act, could help lower what eligible enrollees pay from up to $250 per month to $1 per month.
Conclusion: Nevada and Colorado have now passed public options that, like Cascade Select, function through state-guided offerings from private payers. They and other states that are evaluating a public option may look to Washington state as a case study. Cascade Select offers a glimpse of early results from one potential public option model that functions through private payers, standardizes benefits, and caps reimbursement rates. Two new carriers entered the individual market to offer Cascade Select plans, although not every county was covered. On one hand Cascade Care premiums are slightly higher than non-Cascade premiums, perhaps due to lower deductibles. On the other hand, Cascade Select premiums are lower than Cascade Plans (and very close to non-Cascade plans), perhaps due to the provider reimbursement cap.
Several design details warrant continued study. 2022 plan participation and premium rates have recently been released[2] as carriers adjust business models for the second year of the program. Additional longitudinal data analysis will allow researchers to evaluate the impact of launching the program during the COVID-19 public health emergency.
Future policy choices—including decisions regarding the reimbursement cap, the availability of non-Cascade plans on Healthplanfinder, and standardized benefits—could affect premiums, carrier participation, and provider sustainability.
The authors would like to thank Gabe Weinreb for his contributions to this article.
Notes
1 All Cascade Care plans had identical cost-sharing requirements except for two Cascade standard carriers that reported bronze OOPMs of $8,500 instead of $8,550.
2 https://www.insurance.wa.gov/news/fifteen-health-insurers-request-average-rate-increase-547-washingtons-individual-market
3 Figures are up to date as of January 2021, after the close of open enrollment; enrollments change monthly due to special enrollment periods and qualifying life events.
