Yesterday, the board of Washington’s insurance exchange, called the Washington Healthplanfinder, finally certified plans the exchange will sell beginning Oct. 1. The board had been trying to make this certification for several weeks now, but a question arose that is relevant to all the state exchanges. Specifically: How many plans must an exchange offer to ensure robust competition and give consumers the right number of choices from which to select a plan that works for them?
Earlier this summer, state insurance commissioner Michael Kreidler announced that four companies would be selling 31 plans in Washington. Plans from five other companies failed to meet the standards to be offered on the public exchange, the commissioner said. As often happens in closely regulated markets, companies behind the excluded plans began lobbying and filing lawsuits to get the commissioner to change his mind. In a recent Seattle Times op-ed, a doctor at a clinic for low-income people argued that Medicaid managed-care plans must be in the exchange. Legislators trotted out the choice argument, saying consumers needed more options. Final approval came to a standstill.
At the end of last week, Kreidler changed his mind and allowed two of the previously-excluded companies—Kaiser Foundation Health Plan of the Northwest and the Community Health Plan of Washington, a Medicaid plan—to join the club. Then, yesterday morning, the commissioner announced that Molina Healthcare, which he had previously rejected, could join the exchange too, bringing a total of 43 plans offered by seven companies to Washington consumers. (Eight of these plans still need approval from the federal government.) Only time will tell whether that’s the right number. While too-few plans mean limited choices, the literature shows that when consumers are faced with too many choices, they throw up their hands and make no choice at all.
Valerie Bauman, who has been covering the Washington exchange for the Puget Sound Business Journal, wrote yesterday, “It was a significant win for the exchange board, which balked at the limited options initially presented for their approval last month.” Bauman told me, “Initially Kreidler was resistant, but when it became clear the board wasn’t going to budge, things started moving.”
Stephanie Marquis, a spokesperson for Washington’s Office of the Insurance Commissioner, told me Kreidler’s initial rejection of many of the plans stemmed from what the commissioner saw as inadequate networks of doctors, hospitals, and other healthcare providers. One of the plans that serves Medicaid patients, Coordinated Care Corporation, had no contract with a pediatric hospital to treat sick kids. Nor did it have a contract with a Level 1 burn center, Marquis said. Community Health Plan of Washington offered a two-tiered system of copayments. It wanted to charge people different amounts to see the same type of provider. People who sought care at a community clinic would have no copayment, while those seeking treatment at other facilities would have to pay much more. The commissioner found that discriminatory, and the company revised its plans to gain approval. Molina Healthcare, another of the initially rejected plans, had no legal contract with a retail pharmacy. That company appealed the commissioner’s decision, then withdrew the appeal, and solved the pharmacy network problem to gain approval yesterday. The commissioner also rejected the offerings of Moda Health Plan, which did not refile its policies for approval.
Striking the right balance between the breadth of an insurer’s provider network and the cost to consumers—in terms of both premium prices and access to care—has been a trouble spot around the country. Insurers encourage consumers to use in-network providers by offering low coinsurance and copays; if consumers are forced to go out-of-network for care, they could pay much more than they bargained for when they signed up. It should come as no surprise that the networks are small. This spring, Jim O’Connor, an actuary with the Milliman firm, told me that insurers were offering narrow networks as a way to market a low premium to consumers. But a low premium comes at a price—consumers may not have many or any doctors for some special need, or they may be inconveniently located or provide poor care. As Kreidler found, networks can be too narrow, and the potential real price to consumers too steep.
In Washington, both the Business Journal and The Seattle Times have been on this story. But the significance of the what’s-the-right-amount-of-competition question has yet to generate much press attention in other states, and it should. This question is at the heart of the price/benefit calculus—how good will insurance policies be, and is the price reasonable for the coverage? Whether the exchange takes an active role in judging these policies or allows every Tom, Dick, and Harry to sell has been central to the dispute in Washington over who can offer policies to the public. Reporters in other states ought to explain how this issue is playing out in their backyards, too.
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