An ambitious plan to reduce health care costs in Colorado could have far-reaching effects for health insurers and service providers—if it works.
Centennial State is rolling out a so-called public selection plan for the Connect for Health Colorado health insurance exchange, which instructs participating insurers to offer standardized policies that lower premiums by cut reimbursements for providers in their network.
The state’s insurance and hospital industries are staunchly opposed to this interference in their business relationships, just as national healthcare groups protested when the US House of Representatives introduced a form of option. publicity into the 2009 version of the Affordable Care Act. That objection contributed to the right of publicity being removed from the bill that President Barack Obama signed the following year.
But success in states like Colorado and Washington could revive interest in public options. “It’s probably something other states look at and say, ‘This is worth a try,'” said Christine Monahan, a professor at Georgetown University’s Center for Health Insurance Reform.
Likewise, if Colorado Options lead to negative outcomes, such as health insurance companies leaving the state or providers going bankrupt, it could cause policymakers to go bankrupt. difficult policy to take this approach to address high healthcare costs.
The Colorado option was first available on the exchange this year, but only Denver Health Medical Plan has been able to meet its goal of a 5% premium reduction. This year, however, every exchange insurer must offer such a plan for the 2024 plan year as the state moves toward its goal of reducing health insurance premiums by 15% by 2025.
Monahan said supporters of the Colorado Option hope that the impacts will extend beyond that specific type of coverage by reducing premiums across the board. “That would theoretically force those private insurers to start offering more competitive rates, which could eat into their own bottom lines,” she said.
Colorado option
Under the state program, individual and small group insurers must sell standard health plans with the same benefit and cost-sharing on their Bronze, Silver, and Gold policies. To date, insurers and providers have reached agreements to work towards the goal of reducing the premiums of public option, giving shoppers lower-cost plans to choose from. next open enrollment period. This year, 14% of customers in the market signed up for the Colorado Option.
While this may be appealing to consumers, high enrollment in Colorado’s Options plans means lower margins or even losses for health insurers. economy and suppliers will have to accept less revenue.
“Insurers will put a lot of pressure on the states to say that whatever their model is, insurers cannot succeed at the premiums that don’t work,” says Jacob Hacker, of Yale University. public option advocates want”. professor, who first devised a public option in 2001.
Cigna, Denver Health Medical Plan, Elevance Health, Kaiser Permanente, SelectHealth and UnitedHealth Group will offer Colorado Option plans for 2024 that will cost at least 10% less than in 2021, after adjusting for inflation. medical.
It’s an indication that the Colorado Option has worked, said Insurance Commissioner Michael Conway. “We ask hospitals to cut and bend the cost curve to achieve the floor price required by law,” he said.
To achieve lower premiums, insurers have made arrangements to provide reimbursements no less than 165% of the Medicare rate for hospitals and 135% of the Medicare rate for hospitals. other providers, as required by state law. Some of these providers forged agreements with providers just in time to avoid public hearings and prevent regulatory takeovers.
Liz Hagan, director of policy solutions at United States of Care, an advocacy organization for public choice.
Insurers submitted their 2024 plans and premiums, including Colorado Options, to regulators last month. The Insurance Division will publish final premiums in October before open enrollment, which begins in November. Conway acknowledges all plans may fall short of the 10% target, but considers any Which premium reduction is successful.
An insurer’s point of view
However, implementing and maintaining public choice—and a competitive healthcare market—is more complicated than a year’s worth of provider price cuts, said Saskia Young, chief executive officer of Colorado Association of Health Plans.
“There is a huge difference between achieving the allowable level for hospital reimbursement rates and meeting the mitigation goals,” says Young.
The Colorado Association of Health Plans has opposed Choice Colorado since its inception. “It has inherent flaws that, in our view, don’t make it a sustainable program,” Young said. She said insurers are concerned that Colorado is not fully considering factors such as rising costs, changes in usage in the aftermath of the COVID-19 public health emergency. and inflation in general.
And while health insurers are going along with the Colorado Option so far, they could be in denial and stymie the state’s ambitions. For example, an insurance company might stop selling individual and small group policies in individual counties or the entire state, reducing choice for consumers.
Conway points to SelectHealth’s move to enter the Colorado insurance market for the 2024 plan year as proof that this dire outcome will not happen. “They are an established, well known insurance company that makes very calculated decisions and they made the decision to come here, so they know they will be able to turn a profit,” he said. .
Supplier perspective
The hospital industry warns that insurers cannot reduce reimbursements without consequences, and facilities that are already struggling financially will suffer further strain. “When you mandate, cut, or lower rates for a commercial private business, that is what matters,” said Tom Rennell, senior vice president of financial policy and data analysis for the Colorado Hospital Association. That will put more pressure on hospital sustainability.
Rennell said half of Colorado’s hospitals operate at unsustainable profits. “Costs are outpacing revenues, service providers are seeing fewer and sicker patients, and they are facing tough decisions about cutting services or even reducing service levels,” he said. even closed.
Political shares
If Colorado’s choice and Washington state’s Cascade Select plan, two years before the Colorado program, deliver on their promise, copycats could pop up in other states. Nevada enacted a law offering publicly available options in 2026, while Minnesota and New Mexico are conducting statutory studies on publicly traded options models.
And while it’s been more than a decade since the federal public option died on Capitol Hill, the positive results in Colorado and elsewhere may spark renewed interest. “State plans could become the foundation for national action, if they are successful,” says Hacker.
Correction: An earlier version of this story incorrectly described the rules for provider reimbursement rates under Colorado Options.
