States Increasingly Use Power Over Commercial Health Insurance to Boost Primary Care Investment

By Maanasa Kona and Sabrina Corlette

Research has consistently shown that investing in the development of a robust primary care system can significantly improve health outcomes, reduce mortality, and even reduce overall health care spending. However, the U.S. only invests about 5 to 7 percent of its total medical expenses on primary care, which falls far short of the 13 percent that other high-income countries dedicate to primary care.

Recognizing the value of primary care, both federal and state governments have implemented several initiatives to enhance access to and the quality of primary care. However, a significant factor limiting the impact of these interventions is that private insurance plans, which account for 29 percent of the national spending on health care, are not always required to participate in reform efforts. Some states are using their power as insurance regulators to push insurers to invest more in primary care. While these efforts have shown promise in some states, insurers have been slower to comply with these requirements in other states.

Promoting Primary Care Investment In Commercial Insurance

State departments of insurance (DOIs) are the primary regulators of private health plans. They set their own standards and enforce federal ACA standards against plans sold in the individual market and fully insured group health plans sold to employers. Every year, DOIs conduct “rate review,” which examines the premium rates proposed by private health insurers for the upcoming year and ensures that they are not excessive. Some states, such as Colorado, Delaware, and Rhode Island have further established affordability standards, requiring their DOIs to evaluate whether insurers are implementing effective strategies to improve the value of health insurance for plan enrollees. These policies include requirements that insurers increase their spending on primary care services.

Setting a Primary Care Spending Target

A key element in the affordability standards set by all three states is the establishment of a minimum primary care spending target for all state-regulated commercial insurers. Rhode Island, which was one of the first states to propose and implement such a target, required its insurers to gradually increase their primary care investment between 2010 and 2014, and today, the state requires insurers to invest at least 10.7 percent of their total medical expenses in primary care.

In 2021, Delaware enacted legislation establishing the following primary care spending targets in statute: 7 percent by 2022; 8.5 percent by 2023; 10 percent by 2024; 11.5 percent by 2025. Delaware additionally requires its private insurers to, at a minimum, match Medicare reimbursement rates for primary care.

Instead of setting a specific target, in 2021, Colorado required insurers to increase their primary care investment by 2 percent by the end of 2023 (by 1 percentage point in 2022 and 1 additional percentage point in 2023). Colorado further prohibits insurers from raising their premiums to account for their increased spending in primary care.

Measuring Progress Towards the Target

Rhode Island, Delaware, and Colorado enforce compliance with their respective primary care spending targets through their rate review processes. For example, Colorado requires its insurers to submit a template as part of their annual rate filing demonstrating their compliance with the requirement. Insurers are also required to demonstrate their primary care and total medical spending through submission of claims and non-claims payment data to the state all-payer claims database. Under the state’s law, failure to comply with its minimum primary care spending requirement can result in civil penalties, issuance of cease-and-desist orders, or revocation of licenses.

In all three states, the agencies responsible for enforcing these targets periodically produce reports assessing insurers’ compliance. In Rhode Island and Delaware, insurers have been found to be generally compliant with the requirement, and have significantly boosted their spending on primary care. However, in Colorado, despite the state’s more modest target and provisions that would allow the state to penalize noncompliance, private insurers have not achieved the target set for 2022. Private insurers’ investment in primary care has hovered around 5 percent between 2020 and 2022.*

Promoting Primary Care Investment Through Other State Agencies

California and Connecticut have created offices, outside of their DOIs, to monitor their health care markets and promote reforms that will improve the quality and affordability of health care. In 2018, Connecticut created an Office of Health Strategy within its Department of Public Health, which is responsible for “developing and implementing a comprehensive and cohesive health care vision for the state.” In 2020, the Connecticut governor issued an executive order requiring the Office to set a 10 percent target for primary care spending that public and private insurers would be required to meet by 2025. The latest report on progress towards this benchmark assesses payer performance in 2022 and found that only one of the five commercial insurers had met the interim target value for 2022 set at 5.3 percent.

In 2022, California created the Office of Health Care Affordability within its Department of Health Care Access and Information, which is responsible for slowing down health care spending growth, enforcing spending targets, promoting high-value health system performance, and assessing provider market consolidation. As part of its focus on promoting high-value health system performance, California plans to establish a primary care investment benchmark. In April 2024, the Office published recommendations, which if implemented, would require insurers to gradually increase their primary care spending until they are investing at least 15 percent of their total medical expenses on primary care, which would make it one of the most progressive targets established in the country. Recognizing the heavy lift that this requirement would impose on insurers, OHCA proposes giving them until 2034 to come into compliance. The Health Care Affordability Board, which has the authority to approve or reject this proposal, held a public hearing on the proposed benchmark in May 2024 and is in the process of making a decision.

However, the OHCA does not have the legal authority to enforce the benchmark even once it is approved. OHCA plans to “promote, measure, and report primary care investment,” and if finalized, will produce an annual report providing updates on the progress towards the benchmark by each payer in the state.

Looking Ahead

While the states discussed above have made the most progress in setting primary care investment targets, several other states are focusing on this issue as well. For example, Maine, Maryland, Minnesota, Nebraska, New Mexico, North Carolina, and Washington have enacted legislation requiring state agencies to study, and in some cases, publicly report on, primary care spending. The intention in some of these states may be the development of their own primary care spending requirements.

As more states consider establishing these targets, there are a few key points to keep in mind. First, states that have established targets have taken different paths in terms of defining primary care, and establishing methodologies for calculating primary care spending. The process of developing these definitions and methodologies can be difficult, and measuring true progress can depend on how broadly or narrowly states define primary care. In November 2023, the federal government announced its intention to develop a definition of primary care that could standardize measurements across states. Second, given the different needs of populations across different life stages, states might want to consider developing age-adjusting the spending targets to ensure that high need populations like children or older individuals are benefiting from the increased investment. Third, these spending requirements only work if there’s a robust enforcement mechanism in place to create accountability. Establishing mechanisms to mandate reporting by insurers and to penalize non-compliant insurers could be key to successful implementation.

Finally, while improving access to and the quality of primary care is vital to improving population health, it is unlikely that any one policy alone will create the system-wide transformation necessary to achieve these goals. Increasing primary care investment must be part of a broader strategy that includes expanding the primary care workforce, reimbursing primary care appropriately, developing and testing models to improve delivery of and payment for primary care, and making sure health care coverage is affordable and accessible.

* This excludes the investments in primary care made by Kaiser Permanente and Denver Health, which are currently not subject to the required targets for primary care investment because of their unique integrated payer-provider systems.