Health Insurance Affordability Task Force considers utility model

CHEYENNE-The Health Insurance Affordability Task Force discussed models Tuesday that could reduce the cost of health insurance in Wyoming, in addition to unanimously agreeing that the task force should continue its work after next year's legislative session.

The model presented by Wyoming Department of Health Deputy Director Franz Fuchs would be a major change to the healthcare system in Wyoming. If adopted, it would change core hospital services to a utility framework and move all services deemed nonessential to the free market.

Legislators would have to define through policy what a core service is and what a shop-pable service is if they were to draft legislation adopting the model.

During discussion, the task force gave examples of emergency room services and labor and delivery services as essential and elective procedures such as knee replacements as non-essential, or shoppable services.

The model is designed to address the issue of health insurance premiums being unaffordable in the Equality State.

In the current system, core essentials are bundled with shoppable services, leading people to pay a premium for shop-pable services.

Fuchs stressed that increasing health insurance costs have led younger, healthier people to opt out of coverage, exacerbating the problem by leaving insurance pools with a higher proportion of older and higher-risk individuals.

He also provided data that showed an increase in hospital outpatient costs has driven premiums up.

Eric Boley, president of the Wyoming Hospital Association, explained that another factor in rising costs is the standard of care increasing from where it was 30 years ago.

Fuchs argued that an increase in hospital administration costs was a primary factor in overall cost increases.

He also noted that administration costs are the largest cost centers in hospitals, due to the extremely complicated billing system, along with the procedures and rules that exist.

Co-Chairwoman Sen. Tara Nethercott, R-Cheyenne, pointed out that the only way for insurers to manage costs is to scrutinize care and the cost associated, which, in turn, leads hospitals to increase administration in response.

"So we have this self-fulfilling cycle of increasing overhead for both parties that's not ultimately resulting in patient outcomes and reducing costs," she said. "Is that right?"

Fuchs agreed and also emphasized that this problem would only get worse with the development of artificial intelligence.

"I think there is sort of this arms race that's happening," he said. "And I think we see it particularly with AI now; it's gonna get worse and worse."

Fuchs then presented the framework of the utility system; he compared core hospital services to essential infrastructure in communities such as water, electricity and roads.

This model would not allow people to shop for these core services.

He argued that a reason behind high premiums is that insurers are unable to negotiate with hospitals to lower the price of services because rural states, like Wyoming, do not have other options.

Fuchs explained that in more populated states, insurers are able to use competition among hospitals to negotiate lower prices, which, in turn, lowers premiums, but that is not possible in Wyoming.

Rocky Redd, general counsel for Blue Cross Blue Shield of Wyoming, who sits on the task force, echoed this sentiment.

"In a consolidated market in a county that has one hospital that provides 80 to 90% of the services in that county, it's really hard to negotiate," he said.

Fuchs stressed that the model would unchain the free market concerning shoppable services, hopefully driving prices for those procedures down.

He presented potential benchmarks specifying core services, which listed time-sensitive care such as stroke and emergency services.

There would also be benchmarks regarding the price of services, which would consider what a procedure should cost for that specific community based on staffing needs, wages and the cost of equipment. The benchmarks would be updated for each hospital on a biennial basis, similar to K-12 recalibration.

The proposal also recommends simplifying and standardizing billing through a central clearinghouse, where payers would pay the hospital directly. Fuchs noted that this central system should decrease administration needs.

Under this model, block grants would be used to fill the gap between revenue collected and the actual cost of core services.

The estimated cost of the model would be between $100 million and $350 million per year, with potential sources of funding being state investment income, a premium tax or a large employer payroll tax.

Boley was concerned about where the line would be drawn concerning what is an essential service. He gave the example of an OBGYN and how to maintain that service within the community if it were deemed non-essential.

He stressed that could lead to more OBGYN deserts across the state and said that the needs of each community may be different.

Fuchs explained that the goal would be for the Legislature to determine what is essential and non-essential with input from insurance providers, hospitals and the Department of Health.

Fuchs argued that if this model were implemented, private insurers would likely see premium reductions, and the difference in federal funding could be redirected into a reinsurance program to further lower premiums.

In his conclusion, he touched on the possible advantages and disadvantages of this model.

The advantages listed were a potential to lower healthcare costs due to reduced administration costs and payers having more leverage regarding shoppable services; it could even increase competition in the insurance sector.

"If you lower the barriers to entry into building a network in Wyoming, you may get more competition on the insurance side," Fuchs said.

The potential disadvantages of the model include the need for a balanced governance with payers, providers and patients all having input to decide the appropriate model, and if the model is successful, shoppable services may leave Wyoming.

Fuchs finished by stating the belief that this model has the potential to reduce costs and preserve access to core services.

Boley expressed concern about the potential billing system and the complexities involved, in addition to the potential unforeseen consequences.

"What's the downstream impact to our state economy, to our communities?" he said.

At the end of the day Tuesday, the task force acknowledged this model as a legitimate option to reduce the cost of health insurance in Wyoming and will enter the next interim session with a specific focus on legislation that could implement this model.

The task force will continue its work during the next interim session, after the legislative session, which begins Jan. 12, 2027.

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