Colorado Governor Jared Polis and state policymakers entered 2020 eager to build on a successful reinsurance program and a collaborative designed to increase investments in primary care. In particular, legislators and advocates sought to make coverage more affordable for families by creating a Colorado Affordable Health Care Option. If successful, it would have made Colorado the second state in the country to create a state coverage option. Unfortunately, the COVID-19 pandemic brought a swift end to the Assembly’s regular session in March, stalling efforts for the year and leaving many families wondering what was next.
When the General Assembly reconvened in June for a sprint-style three week session, legislators made the most of their time, sending a flurry of bills to Governor Polis. These bills included policies that expand access to telehealth, improve the state’s chronically low vaccination rates, and provide paid sick leave.
Another, lesser known proposal also made its way through the legislative gauntlet and was signed into law by Polis on July 6, 2020. SB20-215, a far-reaching bill to create a health insurance affordability fund, will bring meaningful savings to families who buy their own insurance in Colorado.
About the Legislation
SB20-215 shows a dual commitment to consumer affordability and program sustainability. The bill creates an insurance affordability fund that will be filled by two new state fees. The first fee (starting 2021) will seamlessly continue a soon-to-be retired federal fee of 1.5-2% paid by insurance companies. The second fee (starting 2022) will be paid by hospitals, and is capped at 6% of their net revenue. Colorado fiscal projections estimate that these fees will raise $300 million by 2023. Together, these fees will fund the extension and expansion of Colorado’s efforts to make premiums more affordable.
How the Funds will be Used:
- 70% of these funds will be allocated to extend the Colorado Reinsurance Program for five more years. Since the introduction of this program in 2019, premiums for more than 400,000 Coloradans in the individual market have decreased by an average of 20.2%. The reinsurance program lowers premiums by defraying the cost burden insurers take on when they cover people who use a lot of health care. Specifically, if medical costs for a given consumer exceed a certain limit (called an attachment point), the reinsurance program will chip in a certain percentage (45%-85%) of that consumer’s medical costs for the remainder of the year.
- 20% of these funds will be allocated to offer premium subsidies to families left out of the Affordable Care Act. Thousands of Coloradan families who need help affording insurance aren’t eligible for premium subsidies through the Affordable Care Act. Some of these families don’t qualify for help because they are undocumented immigrants. Other families aren’t eligible for subsidies due to being in the “family glitch,” a policy that ties eligibility for subsidies to whether the cost of an employee’s coverage is affordable rather than the much-higher cost of the employee’s family coverage. This earmarked funding will extend health care affordability to people previously precluded from such assistance beginning in 2022.
- 10% of these funds will be allocated to subsidize premiums for families whose Affordable Care Act tax credits are insufficient for affording coverage. Coloradan families earning a moderately low income (between $52,000-$78,000 for a family of four) are the most likely to not have health insurance. Their incomes are just slightly too high to receive adequate help with premiums through the Affordable Care Act, but are too low to be able to afford the full premium cost. This pool of funding will ensure that families fighting their way out of poverty aren’t punished with insurance unaffordability.
How the Program will be Managed:
The insurance affordability fund will be managed by a new Health Insurance Affordability Enterprise, which will operate as a government-owned business within the Colorado Division of Insurance. The Enterprise will be directed by a board with eleven voting members, as well as the Executive Director of Connect for Health Colorado, the state’s insurance marketplace, the Commissioner of the Division of Insurance, and nine appointees representing a range of stakeholder groups. The board will be charged with establishing the administrative, operational, and accounting procedures necessary to collect fees and pay for the subsidies created by this new fund.
The creation of this state-level fee was not met with much opposition, possibly because the fee replaces a soon-to-be-expired federal tax. Essentially, insurance companies–which were already paying this fee–will continue to pay it, with the state now in control of the funds rather than the federal government. Colorado follows the lead of Maryland, which also leveraged an assessment on health insurance companies, though for slightly different purposes. Other states are also exploring this before the federal tax expires in 2021.
Policymakers consider this policy as one way to address some of the affordability concerns their constituents face. From our findings in Colorado, these include dissatisfaction with cost, concerns about accessing care, and a desire for state-level solutions. While this policy alone will not address all of those concerns, it helps Coloradans and moves the state forward.
At USofCare, we believe that the future of health care will mean:
- People have certainty that the cost for health care is manageable for their personal budget;
- People can get the care that they need, when and how they need it;
- People will have the security and freedom that dependable health care coverage provides as life changes; and
- The health care system will be understandable, transparent, and easy to navigate.
As we continue to battle a global pandemic that hits struggling people most, we know that people want a health care system that cares for everyone. Repurposing existing fees on insurance companies and hospitals to make health insurance more affordable for families is an exciting, innovative way to support people now and bring us into the future we’re working toward. Colorado is a prime example of how states can improve access to care even when resources are scarce. This is an impressive victory for advocates, policymakers, and importantly, Coloradans across the state.
What is Next?
We are interested in seeing how advocates, policymakers and other stakeholders will use this new law as a foundation to build upon. SB20-215 will bring significant relief to thousands of Coloradans, but cannot resolve all access and affordability challenges. In addition, many people, regardless of how they receive their coverage, are frustrated and confused about what their insurance covers, indicating that there is room for improvement in plan design and system navigability. USofCare conducted Colorado-based opinion research in November 2019 and found that:
- 19% of respondents said that it was hard to understand what they were buying or what their insurance covered.
- 66% were more interested in a policy that offered comprehensive benefits to consumers.
- Coloradans across the political spectrum were supportive of a health insurance plan that could improve access to services, such as primary care visits, before a deductible is met.
Finally, with a global pandemic impacting our economy, states across the country are seeing significant changes to their job markets. This is notable, because the vast majority of Americans receive their insurance from their employer. A recent study in Colorado found that 47% of Coloradans say they or someone in their household has lost their job, lost income, or had their paid hours reduced as a result of the coronavirus. This is consistent with national findings: an analysis by Kaiser Family Foundation estimates that 26.8 million people across the country could become uninsured due to loss of job-based health coverage if they don’t sign up for other coverage. Those that do enroll in new insurance may be able to use Medicaid, and others will need to buy their own insurance plan through the federal or state insurance marketplace.
Whether the Colorado General Assembly reintroduces its Affordable State Coverage Option legislation or returns in 2021 with a different approach, COVID-19 has demonstrated that our health is only as good as our neighbors’, and there is still work to be done.