A first-of-its-kind Obamacare “public option” will be implemented in Washington state after Gov. Jay Inslee last week signed into law a bill creating the new health care program.

The program will be a trial run for this kind of health care expansion, which has become something close to the bare minimum for Democratic presidential candidates. Pretty much everybody in the race, from Joe Biden to Bernie Sanders, supports a public option. Now Inslee, who is running for president on a climate change-focused platform, can boast that he has actually put it into practice.

Here is how the “public option” plan — I keep putting it in quotes because it’s not technically a government health care plan like a Medicare or Medicaid buy-in would be — actually works:

The Washington government would contract with private health carriers to sell state-sponsored health insurance plans on its Obamacare marketplace.

The public option plan would be required to meet certain benefits and out-of-pocket requirements set by the state.

The plan would pay health care providers 160 percent of Medicare rates, with a few limited exceptions.

The state will explore increasing the eligibility for insurance tax subsidies from 400 percent of the federal poverty level (as set by Obamacare) to 500 percent.

“It really is a public option in the sense that we have a public umbrella of benefit to all Washingtonians,” Inslee told me in an interview over the weekend. “It is a public guarantee for the first time in the nation for access. It’s a legal benefit.”

Inslee’s office estimates the public option plan would have premiums 5 to 10 percent lower than the current private offerings on the marketplace. Washington is also among the states that have struggled to make sure at least one insurer is available in every country, and this public option plan should help prevent any counties from being left without any coverage available.

There are certainly possible pitfalls. Inslee is optimistic about containing costs by setting a hard cap on provider payment rates, but those caps can be lifted if an insurer isn’t able to build an adequate provider network at those rates. Providers could have a strong incentive not to participate in the public option plan, which would mitigate its cost-saving potential.

“Our success will be dependent on our judgment in setting these rate caps in the right place,” Inslee told me. “We think we are in the sweet spot. Time will tell.”

Our full conversation is below, edited for clarity and length.

Dylan Scott

You just signed a public option bill. This is a quote-unquote “public option,” but it’s a government-sponsored plan that private health insurers will sell on the exchange under these parameters set by the state. Other states have looked at doing a Medicaid buy-in, a government health care plan. Why did you structure this program the way you did?

Jay Inslee

It has a couple benefits. It really is a public option in the sense that we have a public umbrella of benefit to all Washingtonians. It is a public guarantee for the first time in the nation for access. It’s a legal benefit.

As far as how do we engage with the procedural aspect, going through private carriers, that’s okay as long as you restrain your cost. The important thing about this is for the first time we are restraining costs in a meaningful sense. There are rate caps that are first in the nation, I believe, throughout the system.

The two most elemental things are universal access and the cost containment mechanism. We thought it was easier to get done, which is a good thing.

Dylan Scott

I was curious on the rates — maybe I’m missing something. The rates for provider payments under the state “public option” bill are 160 percent of Medicare. But there is this loophole: If a health plan can’t construct a network, then it wouldn’t be bound by those rates.

Will that create an incentive for providers not to participate with the public option plan? Because they might look at it and think, “Well, if these plans can’t create a network, then they won’t be bound by Medicare plus 60, and we might be able to get better rates.” Is that something this plan guards against?

Jay Inslee

We’ve thought a lot about it. Our success will be dependent on our judgment in setting these rate caps in the right place. Simultaneously, it guarantees coverage and is an incentive enough to get into the program by giving you, the carrier, more customers. We think we are in the sweet spot. Time will tell. But we think it is a powerful mechanism to drive down costs throughout the system.

The idea of this is to grow the scale of a less expensive product, which then creates competitive pressure on the private market, and will drive down their costs as well. The goal is cost containment throughout the system.

Dylan Scott

I know you started out proposing paying providers at Medicare rates and ended up at Medicare plus 60. I assume part of the reason you moved up is that it would be more palatable to providers and allow them to make it work to avoid the problem I described.

Jay Inslee

Yes, we did a very sophisticated analysis of market conditions and we think we squeezed the most savings out of the system as we could. Now, look, when you do something that’s first in the nation, which this is, don’t be surprised if there are adjustments in the years to come.

We hope this will be a smashing success. We hope that it will give a shot of courage to other governors to move forward toward universal access. We were willing to take the leap and we’re gonna learn as we go along, I’m sure, and there will be some modifications. But we had to get started.

Dylan Scott

You’ve endorsed the idea of Medicare-for-all.

Jay Inslee

Well, I call it Medicare for all who want it. I have not called for making all private coverage illegal. I’ve not called to make all private carriers illegal. There’s a little flavor difference there. We do obviously believe health care is a right; we believe in universal coverage. We believe my step is a good step forward, but it’s not the only one.

We’ve got to reduce the age of automatic entry. We’ve got to make it accessible to everyone who does want it. I think we should reduce the age of eligibility to zero for new citizens. That will give us a full Medicare plan as more Americans come into the system. I think those are good things for us.

Dylan Scott

I know you were targeting the individual market with the plan you just passed in Washington. When you think of Medicare for all who want it, would you be willing to let people who get insurance through their work join a government plan if they wanted to?

Jay Inslee

Yes, that includes employer-sponsored plans. They’re certainly eligible to come in. I believe over time, people are going to find it very, very attractive because I think over time it will reduce the costs. It’s one of the reasons we did this public option plan, to demonstrate to the country we could get better coverage at a cheaper cost with public involvement. I think it will give people confidence to move to a Medicare-for-all system.