In July 2021, Governor Kate Brown signed into law HB 2010, which charges the Oregon Health Authority (OHA), in collaboration with the Department of Consumer and Business Services (DCBS), with developing a potential path for a public option in Oregon that is designed to increase the number of people in Oregon with health insurance and help Oregon achieve health equity.
A new report from Manatt Health, Oregon Health Authority Public Option Implementation Report, reflects the outcomes of a series of Manatt-facilitated discussions with state officials in the fall of 2021, and represents the latest addition to a growing resource library of reports about state-based public options. To date, three states have enacted public option laws: Washington, which passed the first public option law in 2019 and is the only state to have implemented such a law, and Colorado and Nevada, which are in the process of implementing laws enacted in 2021.
The Oregon report recommends a public option model that follows the Washington and Colorado models in proposing that the public option be offered by licensed insurers in the ACA Marketplace. However, the model breaks new ground in considering how the new health insurance option could be structured to be consistent with the “coordinated care model” that is at the core of Oregon’s plan design for its Medicaid and public employee health programs.
The report examines how Oregon could use a public option plan to build on the success of coordinated care organizations (CCOs) in using value-based payment (VBP) strategies, cost growth targets and other cost-containment strategies to limit annual cost growth. The report also examines network adequacy issues and other plan design features that are integral to achieving Oregon’s goal of eliminating health inequities by 2030.
The report’s recommendations include strategies designed to reduce health insurance premiums and capture the resulting federal tax credit savings through an amendment to Oregon’s current 1332 reinsurance waiver, with the new pass-through savings used to reduce consumer cost-sharing obligations and expand dental benefits. Finally, the report offers high-level actuarial analysis of various public option scenarios and considers the advantages of Oregon becoming a full state-based marketplace (SBM), using second-generation technology that has generated savings and improved the enrollment process in six states since 2019.
Report Recommendations
Health equity. The report recommends a public option that embodies the state’s commitment to health equity:
- Benefits. The public option should seek to incorporate health equity-oriented benefits and services similar to those included in Oregon’s CCO program to ensure the public option meets the unique needs of its target population.
- Provider networks. To preserve continuity of care for individuals across Medicaid and Marketplace plans, the public option should overlap with/leverage existing plan networks, such as those within the CCO program, which are tailored to the needs of lower-income enrollees.
- Plan operating and governance structures. The state should seek opportunities to incorporate elements of the community-based governance structure required of all CCOs when determining the governance requirements for licensed insurers that will deliver the public option.
Other core attributes. The report recommends an Oregon public option that:
- Is offered on-Marketplace and available to everyone who is eligible to purchase health insurance on the Marketplace. This means the public option would be offered within the individual market, would be required to meet ACA requirements, and would be eligible for placement on the health insurance Marketplace and eligible to receive federal advanced premium tax credits (APTCs).
Though any currently Marketplace-eligible individuals would be permitted to enroll in the public option, regardless of income level, the design and marketing of the plan would focus on individuals with incomes just above Medicaid eligibility levels (i.e., between 138% and 250% of the federal poverty level (FPL)).
- Offers low cost-sharing, ideally between 94% and 98% actuarial value (AV), to enhance affordability. Currently, the ACA offers Marketplace plans at varying “metal tiers”: platinum, gold, silver and bronze plans, which carry a 90%, 80%, 70% and 60% AV, respectively. The ACA also provides additional cost-sharing reductions that offer silver plan variations for eligible populations at the 94%, 87% and 73% AV levels (e.g., individuals earning up to 150% FPL, between 151%–200% FPL, and 201%–250% FPL, respectively).
Based on preliminary estimates, reducing cost-sharing beyond what is currently offered on the individual market is projected to cost from $11.7 to $31.7 million in 2023, depending on how large the targeted cost-sharing reductions are and who is eligible to receive them.1 Accordingly, the state may be limited in the degree to which it will be able to bring down cost-sharing levels for the public option, depending on whether the state pursues and gains approval for a 1332 waiver, and the degree to which federal savings are ultimately achieved under the waiver.
- Offers comprehensive benefits, including all Essential Health Benefits (EHBs) and, if possible, dental coverage. Under the ACA, there are ten categories of EHBs required of all Marketplace plans.2 Oregon’s EHB benchmark plan, as currently designed, provides a solid starting point for the public option benefit package.3 However, in contrast to Oregon’s Medicaid benefit package, adult dental care is not a covered benefit under the Marketplace EHB. This means that should the state include dental benefits in the public option, the state would be responsible for paying any associated additional premium cost as a result of that benefit being included.
Based on preliminary estimates, adding state-financed adult dental coverage to the ACA benefit package is projected to cost from $36.3 to $78.5 million in 2023, depending on the level of coverage offered. Therefore, as with reducing cost-sharing, the state may be limited in the degree to which it will be able to offer a dental care benefit under the public option, depending on the availability of state funds or whether the state pursues and gains approval for a 1332 waiver, and the degree to which federal savings are ultimately achieved under the waiver to fund the additional benefit.
- Is aligned with other state efforts to transform the health care delivery system. Oregon has one of the most advanced cost-growth benchmark programs in the country, which was extended to all state health spending in 2019 after the state had successfully held Medicaid spending to a 3.4% annual cost growth target since 2012. The benchmarking program includes a VBP compact and other initiatives to improve affordability and quality in health care delivery.
1332 waiver. The report recommends that Oregon amend its current 1332 waiver, which generates pass-through savings for the state’s reinsurance program, to generate a second stream of pass-through savings through a premium reduction strategy similar to Colorado’s 1332 waiver amendment request, which is undergoing review by the Centers for Medicare & Medicaid Services (CMS):
- Pursuing premium reductions to both generate pass-through savings under a 1332 waiver and reset premium rates for the public option. This means the state would make a statutory commitment to achieving premium reduction targets, with additional accountability measures incorporated to ensure the targets are met. These premium reduction targets would also serve as a premium reset to adjust for excess cost growth in the past.
Preliminary estimates show that premium reductions driven by the implementation of an Oregon public option could generate incremental pass-through savings ranging from $32.8 million (5% premium reduction) to $111.5 million (15% premium reduction) in 2023. Those savings could then be reinvested by the state to provide additional benefits or reduce cost-sharing for the public option.
- Subsequently holding the public option accountable to the statewide Cost Growth Target of 3.4%. Beyond an initial premium reset, Oregon should seek to demonstrate continued adherence to the statewide Cost Growth Target of 3.4% as an additional means of ensuring the program remains affordable in the long term.
Other Considerations
The report outlines additional issues for the state to consider in deciding whether to move toward implementation of a public option, including the potential impacts of such a public option on Oregon’s market stability, and potential impacts on consumers’ shopping experience and/or buying power. Implementing a public option may require certain statutory changes and/or other program changes to fully implement, including statutorily mandated premium reduction targets and dental benefits, as well as transition planning for an SBM.
The Oregon Legislature will meet in February for an off-year short session. Whether any action will be taken this year is an open question given uncertainty about whether ARPA subsidies will be extended into 2023 (as assumed in the actuarial analysis), as well as the challenges Oregon will face with the unwinding of the public health emergency (PHE), which could have a substantial impact on Marketplace enrollment.
1 All actuarial analyses and projections presented in this report are preliminary and high level and assume continuation of enhanced federal tax credits under the American Rescue Plan Act (ARPA) through 2023. Oregon could pursue additional steps to refine these projections in the future, with more detailed data and robust Oregon-specific micro-simulation modeling.
2 “What Marketplace health insurance plans cover,” HealthCare.gov. Available here: https://www.healthcare.gov/coverage/what-marketplace-plans-cover/.
3 Oregon revised its EHB package to enhance SUD benefits following CMS’ 2019 Notice of Benefit and Payment Parameters (NBPP) rule permitting states more flexibility in developing their state-mandated benchmark plan. The approval letter is available here: https://www.cms.gov/files/document/82820-or-ehb.pdf. More information on Oregon’s Essential Health Benefits rulemaking is available here: https://dfr.oregon.gov/help/committees-workgroups/Pages/EHB-rulemaking-committee.aspx.