Health Insurance Market Structure and State-Based Public Option Laws: Evidence from Washington State

Abstract

In response to political gridlock at the federal level and concerns about market concentration in the private health insurance industry, several U.S. states have proposed their own bills to establish state-based public option programs, including three that recently became law in Washington State, Colorado, and Nevada. I study Washington State’s Cascade Care Law, which implemented a state-based public option program in its individual health insurance market starting in 2021. I use plan offering data and administrative enrollment data from the Washington Health Benefit Exchange, Washington’s state-based Affordable Care Act exchange, to provide a descriptive analysis of how market structure, insurers’ plan offering decisions, individual enrollment, and market concentration evolved during the 2020-2022 plan years. A key descriptive finding of this paper is that county-level insurance market competition has improved since Washington’s state-based public option program was implemented; with thirteen and twelve insurers offering plans in 2021 and 2022, respectively, up from nine insurers in 2020. I also document considerable variation in the set of plans insurers decided to offer and the set of counties they served. Enrollment in the public option plans that were offered was low.

Keywords: health insurance, market structure, health insurance market competition, public option