Washington hospitals are urging Gov. Bob Ferguson to veto a bill that would limit health insurance reimbursement rates for state workers and public school employees.

The bill is designed to reduce health care costs for the state. But the Washington State Hospital Association says it shifts the burden to care providers and that hospitals could lose around $100 million per year if the change becomes law.

“Just because [the state is] paying less doesn’t mean it costs less to provide the care,” said Ashlen Strong, vice president of government affairs at the association. 

Reducing payments to hospitals for state and school employees would likely increase the cost of care for others because hospitals would negotiate with other insurers to make up the difference, according to the hospital association. If those negotiations aren’t successful, hospitals could look at reducing jobs or services.

Supporters of the policy argue that health care is unaffordable and that this bill would help reduce out-of-pocket costs for patients. They also say that hospitals could lower executive pay before turning to layoffs and service reductions. 

Independent rural hospitals would be exempt under the bill. In Washington, two hospitals were recently found to have negative operating margins in Chelan and Clallam counties, according to reports published by the state auditor in May. 

Since the COVID-19 pandemic, health care systems were “completely upended,” said Chelene Whiteaker, senior vice president of the association. And with costs for labor, supplies and equipment increasing, hospitals say they have been struggling financially. 

Hospitals would also be subject to higher business and occupation tax rates that the Legislature approved, which would be around $60 million in taxes every year, according to industry estimates. 

An amendment to have hospitals exempted from the tax hike after 2027 was unsuccessful.

This story is republished from the Washington State Standard, a nonprofit, nonpartisan news outlet that provides original reporting, analysis and commentary on Washington state government and politics.