An overview of Nevada’s new insurance law (SB 420)
Earlier this month, Nevada Governor Steve Sisolak signed into law SB 420, which sets the stage for the introduction of new state-directed insurance offerings in the individual and small group markets. State officials are placing this effort in the “public option” column, and what eventually emerges might validate the label. It is also possible that the new offerings will look more like existing private coverage operating under tighter state rules.
The primary objective of the law is premium savings for consumers. The state legislature did not specify a clear route for cutting expenses, preferring instead to leave implementation up to the prospective sponsors of the new offerings. In the end, it may not be possible to satisfy all of the law’s goals, which may conflict in important ways.
The following are SB 420’s key provisions:
- Officials overseeing the state Department of Health and Human Services, private insurance market, and the Affordable Care Act (ACA) exchange are tasked with jointly bringing into existence new “public option” insurance offerings.
- Sponsors of public option plans must provide at least two offerings, with one complying with the silver plan requirements of the ACA, and the other the gold tier.
- The new plans are to be made available to all individuals buying coverage through the state’s ACA exchange and in the individual market operating outside of the exchange. The state also has the discretion to make the coverage available to workers employed by small businesses.
- There is a long planning period before introduction of the new insurance plans. Enrollment into the new coverage would begin no earlier than 2026.
- State officials will select approved plans based on a competitive bidding process. Insurers with Medicaid managed care contracts are required to submit good faith bids as potential public option plans.
- Facilities and practitioners that receive payment for their services from the state’s Medicaid program (including through participation in Medicaid managed care plans) or health plans servicing state employees must participate in at least one submitted bid in the public option selection process.
- On average, premiums for the public option must be at least 5 percent below the benchmark plan in every zip code, which is tied to the second-lowest priced silver plan offered in the ACA exchange. Presumably, this limitation means that some measure of the average premium across all of the public option plans must meet this requirement, although the law does not specify a precise methodology for ensuring compliance. Further, the public option’s premium (again, presumably the average premium) must not rise by more than the Medicare economic index (MEI) each year. The MEI is a measure of medical inflation tied to input costs for physician services.
- The law allows state officials to relax these limits if, on a statewide basis, average premiums are at least 15 percent below the benchmark rate in the ACA exchange. In other words, premiums can rise more rapidly than the MEI in some years if overall premiums remain well below the ACA benchmark.
- Public option plans are to reimburse providers at rates that are, “in the aggregate,” equal to or above the rates paid by Medicare. Again, presumably some averaging of a network’s contracted rates will be measured against Medicare’s payment rules to determine compliance.
- The director of the state Department of Health and Human Services is allowed to directly administer the public option if it is determined that doing so is necessary to fulfill the objectives of the law. This fallback authority seems designed to spur private insurers to participate constructively in meeting the state’s goals, lest they open the door to a publicly-administered competitor.
- States officials can contract with an actuarial firm to assess the effects of the new law on the state’s insurance markets and access to medical services for the state’s residents.
- State officials are tasked with assembling any necessary and beneficial waiver requests for submission to the federal government under existing Medicaid and ACA law.
There are several unanswered questions about how the Nevada law will work. Most importantly, it is not clear that the state’s hospitals and physician groups will cooperate in its implementation. The legislature tried to establish Medicare’s rates as a floor, but many providers will view this protection as inadequate because commercial rates are often well above what Medicare pays for the same services. The requirement that providers participate in the public option or risk losing their Medicaid and state employee revenue will remain controversial, and thus subject to potential revision.
With multiple years between enactment and initial enrollment into the new plans, there is much that could still change. It is therefore best to view what Nevada is pursuing as a work in progress that may undergo revision as the political conversation around it continues.
James C. Capretta is a columnist for State of Reform and is a resident fellow at the American Enterprise Institute.