Nevada is about to embark on an experiment — can it use a public option to lower both gross and net premiums? The state senate just passed the bill SB420 with amendment 833. The governor will sign the bill sometime soon-ish. The bill does several things in Medicaid as well as the Exchanges. So let’s see what is happening here as I do a live read of the bill section by section.
Section 1 — title
Section 2 — intent This is the intent of the policy where Nevada is identifying the problem(s) that they are trying to solve. Identifying the problem that is trying to be solved is critical as I think that there is a good amount of intellectual and policy messiness around the phrase “public option” when the problem is not specifically identified:
It is hereby declared to be the purpose and policy of the Legislature in enacting this chapter to:
1. Leverage the combined purchasing power of the State to lower premiums and costs relating to health insurance for residents of this State;
2. Improve access to high-quality, affordable health care for residents of this State, including residents of this State who are employed by small businesses;
3. Reduce disparities in access to health care and health outcomes and increase access to health care for historically marginalized communities; and
4. Increase competition in the market for individual health insurance in this State to improve the availability of coverage for residents of rural areas of this State.
That is a very reasonable set of problems to try to solve. It is a big set of problems, but a reasonable set. The theory of change is that the state has enough purchasing mass to get good deals and competition can do good things in lowering prices. That is a plausible theory of change.
Section 3-9 — definitions Useful things for the lawyers. The big thing I see from a policy POV is that the state is outsourcing a good chunk of the definitions to how CMS does stuff. This makes a lot of sense but a potential source of conflicts in a discordant state-federal political alignment.
Section 10 — Meat and Potatoes of a Public Option
The public option will be an ACA qualified health plan with coverage of the 10 essential health benefits. it will be available only to people who are eligible to purchase plans on the ACA marketplace (this is a limit to some immigrants with complex statuses).
The state may also may the public option available to small business
The selling point is that the PO will have a premium 5% below a “reference premium” and the premium growth shall not increase faster than the Medicare Economic Index on an annual basis. The reference premium is the benchmark silver plan in 2024. This is interesting. Nevada is going with a single Public Option offering with the intent of creating a large “Silver Gap” to increase affordability for all residents. This is important as I discussed, in conjunction with Billy Wynne, when we looked at Colorado’s plan. The net savings potential for a straightforward public option for people who get subsidies is entirely predicated on being able to play systemic gap games. Nevada is explicitly playing a gap game. My one concern is that Nevada right now is a reasonably competitive market where the Silver Gap between the cheapest Silver and benchmark silver is about 3.5% in Las Vegas. There is not a lot of squeeze here. Urban counties are unlikely to see large gains in net of subsidy affordability as I think the competitive dynamic will be that insurers will either narrow networks, get more restrictive or otherwise rejigger their offerings to be able to craft a plan that is price competitive with a public option.
As soon as that dynamic effect occurs, the silver gap gets crushed and net affordability decreases for price sensitive buyers unless there is a way for the state to capture the counter-factual savings in a waiver (more on this in Section 11)
SECTION 11 — Bring on the WAIVERS
11-1A is an ask for a big set of 1332 waivers to capture as “pass through funding” monies that would be saved by the introduction of a lower price alternative. This is important. Right now in an unwaivered universe, the federal government is the risk bearer when gross premiums go up while subsidized enrollees benefit in this general case, and conversely the federal government is the beneficiary when gross premiums decrease as affordability for subsidized enrollees decreases. If such a waiver can be constructed and approved, then the plumbing problems of increasing affordability by dropping gross premiums gets solved and it is readily replicable in other states. IF THIS WORKS IT IS A BFD.
11-1-B-1 This is fascinating.
Combine risk pools for the Public Option with risk pools established for Medicaid, if the Director can demonstrate that doing so would lower costs, result in savings to the federal and state governments and not increase the costs of private insurance or Medicaid; or
One way of visualizing a lot of the exchange plans, especially near the CSR-94 benchmark is Medicaid Plus. This would make it explicit, and if merging the risk pools without increasing federal or state Medicaid outlays is possible, that implies a pretty low reimbursement rate for services for the Public Option. It also implies a lot of wiggle room for people who are bouncing in between Medicaid and Exchange categories. That wiggle room could be quite valuable in letting people stay where they are for the year instead of transitioning programs mid-year. My big question on this proposal would be HOW DOES RISK ADJUSTMENT WORK? My head is hurting hard as I think about that problem.
The rest of Section 11 is that the Exchange director can hire experts to help them make the rest of the law make sense.
Section 12
The public option will be privately run by an insurer acting as a Third Party Administrator. All Medicaid managed care entities and CHIP insurers are required to submit a good faith bid. The networks between the PO and Medicaid are supposed to be aligned:
Demonstrate alignment of networks of providers between the Public Option and Medicaid managed care, where applicable;
This makes the PO a pretty valuable contract as lots of people move between Exchange and Medicaid eligibility over the course of a year. An aligned network lowers learning and hassle costs for the enrollee which should increase retention as well as provide one hell of a risk adjustment edge to whomever is offering the public option.
Section 13
This is the network chunk. Any clinician who accepts the state employee health plan or Nevada Medicaid must also participate in the public option. There is a waiver if enough clinicians refuse the rates and drop all programs (Medicaid, State Employees, Exchange PO) to keep docs/hospitals in Medicaid & State Employees. This is a big administrative hammer.
Section 14 — payment
The price floor is Medicare Fee for Service (Medicare 100%) This is an aggressive price floor but it is not a price ceiling (unlike some other states that have attempted something called a public option). Exchange insurers have gone to market with Medicare + 5 and Medicare +15 plans before so this is plausible IMO.
WRAP UP
This is big if the waivers in Section 11 can be granted. If those waivers can be granted, the state will have one hell of a hammer to drive down provider reimbursement rates through quasi-administrative rate setting and mass market power by the combination of Medicaid, State Employees, Exchange and ACA regulated Small Group markets. Conditional on the Section 11 waivers being granted, I think the biggest gain is in the small group markets to get Medicare-esque pricing but the individual market would also see an increase in affordability.
If the Section 11 waivers pass, this is going to be a challenging but promising implementation. If the state can’t get pass-through funding, this is an interesting tweak to the markets but I think that the competitive dynamics would quickly eat up most of the Silver Gap in a few years.
Spanky
Excellent.
Now do it in Samuel L. Jackson’s voice.
David Anderson
@Spanky: I wish a motherfucker would….
Actually, I hear this more as a Morgan Freeman narration — Cole or Betty Cracker are the most likely to have SLJ as the narrator of their posts in my imagination.
rikyrah
Mayhew,
You are a treasure.
Breaking it down in plain English like this :)
Thanks.
Spanky
@David Anderson: Well, I guess Morgan Freeman (MF!) is better than David Attenborzzzzzzzzzzzzzzzzzzzzzzz.
dr. bloor
@Spanky:
Oh, I got that for you.
David Anderson
@dr. bloor: I love writing here.
guachi
If prices can be driven down it looks like a boon to small businesses that can take advantage of that somehow
sab
Many years ago the Nevada legislature passed an estate tax, because all that money was going to the federal government because Nevadans couldn’t use the state estate tax credit because they didn’t have a state estate tax. The new law imposed no additional tax; it just meant that those dollars went to Nevada instead of to Washington. Next election was a bloodbath because Nevadans were furious about the new tax.
Another Scott
Thanks for this. It’s good that they’re thinking about how to do this by building on the ACA.
In addition to the “silver gap” issues you talk about, are there any risks in them tying it so tightly to Silver plans? E.g. if national Medicare buy-in ages drop from 65 to, say, 55; or if Biden’s ARP-II of 2022 changes things so that everyone making less than 10x the federal poverty level gets a subsidy – does that somehow blow up NV’s efforts? Presumably since the NV plan is voluntary, people could just move over if they want, but could NV end up in a situation where their plan was somehow “too cheap” compared to alternatives and then it goes into a death spiral?
tl;dr – states have large budgets, but are exposed to lots of risks that the federal government is not. Ultimately, there needs to be a federal solution.
Thanks as always.
Cheers,
Scott.
?BillinGlendaleCA
@Another Scott: Since most states can’t run a deficit, that’s caused problems with most plans.
Ken
@Spanky: I would think Attenborzz would be ideal for some of Anderson’s posts. “And here, the insurer has silver-loaded in thirteen counties, thinking it would make a small but steady profit. But it’s in for a surprise. A competitor also sees the opportunity — and moves in….”
Lobo
Colorado “public option bill” ? Who knows what it means? Stay tuned.