Moneybox

In the Real World, Health Care Reform Is Really, Really Hard

What the fate of two Democratic efforts at health care reform tells us about the future of fixing insurance.

Protesters supporting “Medicare for All” hold a rally outside PhRMA headquarters.
Protesters supporting “Medicare for All” hold a rally outside PhRMA headquarters on April 29 in D.C.
Win McNamee/Getty Images

Since 2016, the conversation about health care on the left has focused on big, sweeping reforms. On the internet, you either support “Medicare for All” or you’re a neoliberal sellout. On the campaign trail, presidential candidates are talking about ideas that were once considered too radical to pass Congress, like a public option, as prudent compromises.

Two news stories out of Washington and Connecticut this month are a reminder that, back in the real world, eking out even incremental progress on health care is very, very difficult. In both states, Democratic lawmakers sought to create what might be called sorta public options—government-designed health plans that private insurers would sell to individuals and small businesses. In Washington, the effort succeeded, but only after politicians made a major tweak to appease hospitals that will make the coverage more expensive. In Connecticut, meanwhile, the attempt flamed out in an episode that may foreshadow just how hard large insurers will fight even small-bore attempts at reform.

Let’s start on the West Coast. On May 13, Gov. Jay Inslee signed a law that will let residents in Washington buy a state health plan called Cascade Care, starting in 2021. Under the program, the government will craft the benefits package, then contract with private insurers to sell it.

Inslee, who is making a dark horse bid for the White House, has touted Cascade Care as the country’s first “public option.” That’s stretching things a bit; when experts use that term, they usually mean a health plan where the government is responsible for both setting benefits and covering the cost of claims. Washington won’t do the latter—the private insurers will take on all the financial risk and reap the profits—and the state isn’t offering any subsidies beyond what the Affordable Care Act provides (though the law requires the state to study the possibility of doing so in the future). Insurance companies won’t be required to offer Cascade Care either, and providers won’t be forced to accept it.

If that sounds like a tentative step into the world of government-backed insurance, well, that’s because it is. “We wanted to try and develop something that we could do within current law and would not require some major outlay from the state, because we don’t have that kind of money,” Jason McGill, a health policy adviser to Inslee, told me. The near-term hope, McGill explained to me, is that if the state works with carriers to offer a standard, low-cost health plan, hospitals will feel obligated to accept it.

But because Democrats didn’t want to force hospitals to accept the new insurance plan, they had to make other concessions as well. Originally, lawmakers had wanted the program to save more money by limiting Cascade Care’s payments to providers at exactly the Medicare rate. That triggered “a lot of pushback” from the medical community, Mary Clogston, a senior policy aide for the state’s House Democratic Caucus, told me. There were concerns that unless they raised the cap, no hospitals would accept the insurance in some parts of the state, or other providers would try to make up for the low payments by charging more to patients who get coverage from their employer.

In the end, legislators settled on payments that were moderately lower than the rates private insurers currently offer providers in the state but more than what Medicare pays. The goal is to offer coverage up to 10 percent cheaper than other options on the state’s Obamacare exchange, but that’s not a guarantee, and it won’t change the insurance market overnight. “Cutting costs is hard,” Clogston said.

Whatever Cascade Care’s limitations might be, the new law is still a victory for health reformers who would like to see a larger role for government in offering coverage. In Connecticut this week, the reformers were less lucky. There, one of the nation’s largest insurers scuttled a proposal to create a public option similar to Washington’s, which had been supported by Democratic Gov. Ned Lamont and the state’s Democratic legislators.

Exactly what happened in Connecticut is a bit murky. One of the public option’s key proponents, state Comptroller Kevin Lembo, declared the proposal dead on Wednesday afternoon in an interview with the Hartford Courant and blamed Cigna CEO David Cordani for killing it. According to Lembo, Cordani had said that if lawmakers went ahead with the bill, his company would release a letter threatening to move its headquarters out of the state. A Cigna spokesman denied that claim and told the Courant that the carrier had only lobbied against the bill, not issued a threat. But Connecticut state Sen. Matt Lesser, another supporter of the legislation, told me Cigna had in fact made the same threat to him during a phone call. “It’s just sort of stunning to me,” he said.

What makes this incident especially shocking is that even though Cigna is based in Connecticut, the company doesn’t sell any coverage on the state’s individual or small group markets. In other words, its business would have been totally unaffected by the bill. The company simply seemed to be opposed to any additional government role in the private market. “They had nothing at stake except the principle of the thing,” Lesser told me. “The idea that the state would get involved in market-setting seemed like a step on the road to socialism.”

According to Lesser, other insurers in Connecticut were interested in negotiating details of the new public option, rather than derailing it entirely. But Cigna’s decision to, in his telling, squash the effort by using its heft as a major employer in the state shows that at least one of the country’s biggest carriers is willing to take a militant stand against anything that even resembles public health insurance. It’s not clear if the company could be as effective at intimidating politicians outside of Connecticut, where insurance is a key local industry. But Cordani, Cigna’s CEO, also chairs the board of America’s Health Insurance Plans, the sector’s top lobbying group. His views on these issues will likely carry plenty of weight whenever health care reform pops up again on Capitol Hill. We should all expect the fight to be brutal.