Abstract
Washington State continues to wrestle with rapidly rising health‑care costs—premiums up nearly 49 % over the past decade, cost‐sharing so steep that many residents delay or forgo care‡. This post outlines free‑market solutions: fostering competition through reference‑based pricing, reinsurance pools, repeal of certificate‑of‑need restrictions, supporting direct‑primary‑care and health‑sharing models, and improving price transparency and antitrust enforcement. Each option seeks to reduce cost pressure while preserving choice, innovation, and patient access in a market framework.
1. The challenge in Washington State
Washington sees steep premium inflation—employer plans rose 49 % in ten years and individual plans more than doubled‡. Nearly two‑thirds of residents have delayed care or depleted savings, and over 80 % worry about future affordability‡. Commercial premiums increased by 13 % between 2016 and 2019—nearly double inflation‡. Meanwhile, hospitals collectively lost nearly $400 million in the first nine months of 2024, highlighting financial strain on providers and insurers’ cost pressure§.
2. Reference‑based pricing and reinsurance: market tools, state leverage
A state‑mandated reference‑based pricing system ties provider payments to Medicare or a benchmark, ensuring insurers negotiate from a baseline rate. Washington’s 2024 Insurance Commissioner report identifies reference‑based pricing (alongside hospital global budgets and reinsurance) as one of five promising policy options to lower costs‡. Reinsurance for the individual and small‑group markets caps insurer exposure, reducing premiums and encouraging more carriers to enter, boosting competition and choice‡.
3. Repealing certificate‑of‑need laws to spur competition
Certificate‑of‑need (CON) laws limit the entry of new hospitals or services, constraining competition and enabling incumbents to command higher prices. Research from states that repealed CON shows entry of more providers, increased bed availability, and smaller, more efficient hospitals that expand access in both rural and urban areas§. Removing such restrictions in Washington could invite new competitors and drive down prices via market forces.
4. Encouraging direct primary care and health‑sharing alternatives within regulation
Direct primary care (DPC) models—patients pay a flat fee to a primary care provider directly—cut out third‑party payers, reduce overhead, and deliver preventative, high‑value care at predictable cost. Similarly, health‑share ministries or cooperative arrangements allow risk‑pooling among members, often at lower monthly cost than traditional plans, though they carry regulatory and risk considerations†. While not a substitute for comprehensive insurance, they can offer lower‑cost alternatives for healthier populations. Such models flourish best under transparent consumer information and minimal regulatory barriers.
5. Strengthening transparency and antitrust enforcement
Free consumers require clear pricing. Washington’s Health Care Cost Transparency Board and Insurance Commissioner have pushed cost‑growth benchmarks and transparency enforcement‡. Market‑oriented solutions expand this by enforcing penalties for non‑transparent pricing and requiring standardized pricing displays at hospital and insurer portals. Supporting antitrust enforcement to limit hospital and insurer consolidations further preserves competitive markets and prevents dominant systems from inflating prices‡.
6. Targeted drug and PBM reforms
Prescription costs drive spending. Market‑based reforms—such as allowing payers or independent boards to negotiate or set upper limits on drug prices, regulating pharmacy benefit managers (PBMs), and increasing transparency in rebate flows—align incentives while limiting price gouging. These reforms create accountability without direct government price controls yet mirror reference‑based principles that keep pricing competitive‡.
Conclusion
Washington State need not abandon market principles to tame health‑care costs. By combining reference‑based pricing, reinsurance mechanisms, eliminating entry barriers, supporting direct care and sharing models, and enhancing transparency and competition, the state can deliver more affordable—and higher value—health care. These strategies preserve choice, foster innovation, and temper cost growth by aligning market incentives around consumer engagement and provider competition. While not a panacea, they represent a pragmatic, market‑rooted path forward for affordability.
Footnotes
- Employer‑sponsored plan premiums rose ~49 % over ten years; individual plan costs more than doubled‡ jlgh.org+4Washington Policy Center+4Whole Washington+4Governing+1Office of the Insurance CommissionerarXivEconomic Opportunity InstituteVox.
- Nearly two‑thirds of surveyed residents skipped or delayed care; over 80 % worried about affordability‡ GoverningOffice of the Insurance Commissioner.
- Commercial health‑care costs rose 13 % from 2016‑2019—nearly double inflation‡ Office of the Insurance Commissioner.
- Washington hospitals lost ~$398 million in first 9 months of 2024§ Washington Policy Center.
- OIC/AG 2024 actuarial report studied five market‑based policy options including reference‑based pricing, reinsurance, global budgeting‡ Office of the Insurance Commissioner.
- Repeal of CON laws increased hospital entry, availability of beds, and competition in rural/urban settings§ arXiv+1.
- Health‑sharing ministries appeal due to lower cost but carry risk; their growth reflects consumer demand for alternatives† Vox.
- Transparency and antitrust strengthening recommended to curb consolidation and opaque pricing‡ Economic Opportunity Institute.
