Washington State moves to boost affordability and simplify choice in its ACA marketplace
The state's public option may gain some traction in 2023
When considering how states might improve their ACA marketplaces, I’ve often thought that Massachusetts’ ConnectorCare program, which predates the ACA, would be difficult for another state to replicate. That’s too bad, because ConnectorCare offers simpler and better coverage to enrollees with incomes up to 300% of the Federal Poverty Level than does a conventional ACA marketplace. (At incomes above 300% FPL, the Massachusetts marketplace conforms to ACA design.)
Washington state, however, is tacking toward a marketplace that shares some features with ConnectorCare: partial plan standardization, wraparound subsidies offered at low incomes, and a measure of state-imposed cost control. For 2023, those features may be starting to jell.
To borrow a brief overview of ConnectorCare from a previous post:
At incomes up to the 300% of the Federal Poverty Level, Massachusetts applicants who earn too much to qualify for Medicaid are offered a standard, easily comprehensible benefit package with low premiums and out-of-pocket costs. That contrasts with the ACA's bewildering array of sometimes more than 100 plans in four metal levels, each offering a smorgasbord of copays and coinsurance, often with high but Swiss-cheese deductibles to which many services are not subject.
As measured by actuarial value -- the percentage of the average enrollee's annual costs* the plan is designed to pay -- ConnectorCare offers more generous coverage than the ACA's benchmark silver plans (which are enhanced by Cost Sharing Reduction subsidies at incomes up to 250% FPL) at every income at which it's available. The higher AVs in ConnectorCare translate into zero deductibles and lower annual maximum out-of-pocket costs for enrollees -- particularly at incomes in the 200-300% FPL range. While marketplace enrollees in other states may offer plans with lower premiums than ConnectorCare's at incomes over 150% FPL, those low-premium plans will usually expose enrollees to much higher out-of-pocket costs.
Hard to reverse-engineer
Massachusetts officials adapted the pre-ACA ConnectorCare design to ACA funding and regulations via a waiver proposal approved by the federal government. The standardized ConnectorCare plans don’t look much like marketplace plans, but they are technically silver plans with additional state-funded subsidies “wrapped around” federal subsidies and molded to the standardized plan design. Federal subsidy levels are pegged to the benchmark second-cheapest silver plan, as in other marketplaces.
This model is hard to copy for several reasons.
Extra federal money. The extra subsidies that give ConnectorCare plans higher actuarial value and lower premiums (at 150-300% FPL, as high-CSR silver is now free in other states to 150% FPL) than comparable marketplace plans are about 50% funded by a federal Medicaid waiver that made the Massachusetts program (launched in 2006) possible in the first place and has since been renewed at intervals.
Single risk pool. Minnesota and New York exercised an option provided by the ACA to create Basic Health Programs (BHPs) with benefits rather like ConnectorCare to enrollees with incomes up to 200% FPL. In fact, New York’s BHP provides even more generous benefits, as it’s now zero-premium all the way up to the 200% FPL threshold. Unlike the BHPs, however, ConnectorCare plans are in a single risk pool with plans offered above the ConnectorCare eligibility threshold. Thus the program for low-income enrollees doesn’t cannibalize the marketplace available to those with incomes above the threshold. In ConnectorCare, plans offered to enrollees at incomes above 300% FPL benefit from comparatively high takeup among younger adults in the ConnectorCare program.
Competition. Insurers in many marketplaces do compete to offer the lowest-cost and benchmark (second cheapest) silver plans, as these plans are the likeliest choice for enrollees with incomes low enough to qualify for Cost Sharing Reduction, which attaches only to silver plans. In Massachusetts, there is extra impetus to offer the cheapest ConnectorCare plan, as that is the plan offered at the quoted premium level (though additional premiums for most other competitors are only marginally higher).
Simplicity. ConnectorCare applicants choose from among four plans at most, all with the same benefits. The average ACA marketplace now offers 114 plans, many of them virtually indistinguishable; Miami marketplace applicants choose from among 234 plans. While California does standardize plans, and other states are moving toward standardization by degrees — as is CMS for 33 states using the federal exchange — it’s hard to stuff the product-proliferation genie back in the bottle.
Washington transforms its marketplace by degrees
Beginning with enabling legislation passed in 2019, with followup legislation passed in 2021, Washington has moved toward a ConnectorCare model in stages by
introducing in 2021 a set of standardized plans (dubbed Cascade Plans) and a set of quasi-public option plans (dubbed Cascade Select), the latter administered by private insurers but conforming to the standardized design and subject to caps on provider payment rates, as well as to additional value-based care and population health requirements;
giving the public option (Cascade Select) more purchase (beginning in 2023) by requiring hospitals that accept Medicaid and/or the state public employee plan to accept at least one such plan in 2023 unless all counties already had at least one Cascade Select plan available in 2022 (which did not happen);
requiring insurers participating in the exchange first to offer standardized plans, and then, as of 2023, to limit the number of nonstandard plans they offer;
adding supplementary state-funded subsidies to federal premium subsidies to render some silver and gold Cascade and Cascade Select plans free to enrollees with income up to 250% FPL (appropriating $50 million for 2023);
directing the exchange and insurance department to study eliminating nonstandard plans altogether in 2025; and
seeking a federal waiver (since granted) to open the exchange to undocumented state residents with eligibility for state (but not federal) subsidies.
An underwhelming beginning
The Cascade Care program got off to an unprepossessing start in 2021. While the enabling bill, when first introduced, mandated that the public option plans pay Medicare rates to providers, the stipulated rate rose by degrees to 160% Medicare by the time the bill passed — only modestly lower than the estimated average of 174% Medicare paid by nonstandard plans. Ambetter, a brand offered by the cut-rate insurer Centene, which cut its teeth mainly as a Medicaid MCO, very likely pays providers less than the public option and continues to dominate the lowest price points in the Washington marketplace.
While the Cascade design mandated lower deductibles, more services* not subject to the deductible, and fixed copays rather than the more confusing coinsurance, fitting those features into the ACA’s fixed actuarial values for each metal level resulted in plans with higher out-of-pocket maximums and higher premiums than some nonstandard plans.
The Washington Health Plan Finder, one of the more primitive ACA exchanges, did a poor job highlighting and explaining the program and the participating plans. The upshot: two tranches of ill-defined standardized plans swam in a sea of nonstandard plans, many of which had lower premiums and OOP maxes and some of which had lower deductibles than the Cascade options.
Major changes in 2023
This year, the new zero-premium offering for enrollees with income up to 250% FPL is at least somewhat transformative. The home page prominently displays an invitation to explore Cascade Care. At incomes below 250% FPL, the “browse and compare” tool will lead users to a display showing an array of zero-premium Cascade Care plans first. In Seattle (zip code 98105), a grand total of 59 plans are displayed — compared to 79 in 2022 and the national average of 114 in 2023 noted above.
Glitches remain, though. The transformation toward simplifying the choice menu, offering plans with an optimized benefit design and making higher-AV plans more consistently affordable is marred in part by weaknesses in the exchange display. The choice is somewhat complicated by the fact that, thanks to three levels of Cost Sharing Reduction attaching to silver plans, silver plans have a higher actuarial value than gold at incomes up to 200% FPL, but gold plans have a higher AV in the 200-250% FPL range. For reasons I can’t fathom, in the Washington Plan Finder’s “browse and compare” too the default display, showing plans in the order “recommended,” shows silver plans before gold at incomes of 200-250% FPL — notwithstanding that gold plans have higher AV at this income level, and standardized deductibles and OOP maxes are lower for gold ($600 vs. $2,500 deductible, $5,900 vs $7,250 OOP max). In fact the “recommended” display at the $32,000 income level shows all 17 silver plans, four of them free but with premiums then rising to a peak of $334/month, before showing three zero-premium gold plans. That’s insane.
If you click a button asking for help finding a plan and indicate your expected trips to the doctor, inpatient or outpatient treatments, and prescriptions, the algorithm will show gold plans first if you’re in the 200-250% FPL bracket — even if you select the lowest levels of expected care. Clearly the site’s algorithms recognize the superior value of standardized gold at this income level, and the “recommended” display is simply a glitch. (Conversely, the site does default to silver at incomes below 200% FPL, which is appropriate.)
Second problem: Ambetter, which is skilled at dominating state marketplaces, offers zero-premium bronze plans at incomes up to 250% FPL (for a 40 year-old) — and a $0-deductible bronze plan that’s just $4 a month for an applicant with an income of $27,000 (slightly below 200% FPL). That plan also has a $7,800 OOP max for a person at this income level, compared to $2,400 for standardized silver plans. These lures pose relatively minor selection problems, compared to the chaos prevalent in many ACA state marketplaces. But the ConnectorCare model, which offers only standardized plans with income-appropriate cost structure, avoids such lures.
Third: while the Washington exchange’s home page now does include a prominent invitation to explore what Cascade plans are, it’s still easy enough to miss, if you choose a ‘browse and compare” option from the left menu. And the Cascade Care logos do not include a mouseover defining what they are and why you might want one.
Finally, a silly and hopefully not-too-consequential own-goal: the page explaining the Cascade Care low-income program cites the 250% FPL eligibility thresholds operative in the 2022 plan year, instead of those in effect for 2023 (e.g., for a single person, $32,200/yr. instead of the current $33,975). The page also ascribes a 70% AV to silver plans, whereas silver plans for anyone eligible for the extra state help have AVs of 94%, 87% or 73%.
To return to the comparison between Massachusetts’ ConnectorCare and Washington’s Cascade Care up to 250% FPL, here are some similarities and differences
Low cost at incomes approaching the median (300% FPL in MA, 250% FPL in WA): premiums in the Washington plan are actually lower (zero) at incomes from 150-250% FPL than in ConnectorCare, though ConnectorCare offers higher actuarial value at each income level (95%, 94% and 92% compared to 94%, 87% and 80%). Washington’s advantage over a conventional ACA marketplace is the availability of free silver (87% AV) at incomes in the 150-200% FPL range and free gold (80% AV) at incomes in the 200-250% FPL range). Those choice are somewhat complicated by the availability of free gold plans at incomes below 200% FPL, free silver plans at incomes in the 200-250% FPL range, and free bronze at all incomes up to 250% FPL.
Simplified choice, filtering out bad options: ConnectorCare does this completely, Cascade Care only partially, as bronze plans are still available at all incomes and dominated silver plans are available at 200-250% FPL. But standardized plans now make up slightly more than half the plans available in Seattle and Olympia, the two Washington markets I explored. And the field is at least tilted toward zero-premium silver or gold plans within the 250% FPL ring fence.
Single risk pool: both state programs improve coverage at low incomes and so likely improve the risk pool and avoid cannibalizing the market at income above the eligibility level for the extra state help.
Cost control: Massachusetts imposes a higher minimum medical loss ratio (MLR) -- the percentage of premiums an insurer is required to spend on enrollees' medical expenses -- than the federal standard imposed by the ACA, 88% compared to 80%. Insurers have to apply and qualify to participate in the ConnectorCare market, and, as mentioned before, competition among ConnectorCare insurers to offer the lowest-cost plan is robust. Washington, in turn, has imposed direct control over rates that Cascade Select insurers pay providers.
Of course, no state sets out to reform its marketplace with a conscious goal of making it “more like Massachusetts’.” My point is that key elements of ConnectorCare — simplified choices, low out-of-pocket costs, single risk pool, cost control the reduces the price of state subsidies —are worth replicating. Washington is checking all of those boxes to some degree, and could check more going forward.
A next major step would be to eliminate non-standard plans in 2025, as the exchange is tasked with considering. An alternative might be to ban them only at incomes up to 250% FPL, since all applicants below that income threshold can access high-AV plans with zero premium. It also would be helpful to take bronze plans out of the equation at incomes below 250% FPL. Whether it’s viable for insurers — and good for enrollees — to offer some plans only at incomes above 250% FPL is a matter for… study.
Update, 12/19/22: This post needed some proofreading, now provided. Sorry about that.
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* According to a Washington Health Plan Finder press release, “Cascade and Cascade Selection plans have deductibles an average of $1,000 lower than nonCascade plans and cover more services before the deductible is met — including primary care visits, mental health services, and generic prescriptions.”