This week, Colorado legislators introduced legislation to create a state health care coverage option, known as the Colorado Affordable Health Care Option. The goal of this policy is to leverage existing state infrastructure to provide more affordable choices to people in Colorado.
“I pay $18,000/year to access health care. That’s not affordable. I also cannot find a plan that would cover the primary care provider I have been seeing for the past 28 years.” -Shawn, a Colorado consumer
States are leading efforts to provide more affordable access to coverage, and with this proposed state health care option, Colorado legislators are responding to the needs of their constituents. Colorado faces challenges similar to other states: 22 counties have only one issuer offering a product in the individual market in 2020; the premium and cost-sharing options for plans are simply out of reach for many consumers; and, an uncomfortable truth is that they have extreme price variation in their hospital rates across the state, paired with hospital profit margins being the second highest in the country.
This proposed legislation tackles these issues head on, and if enacted, people purchasing this option would save up to 20 percent on their monthly premiums.
This legislation marks the culmination of a collaborative, multi-step process to develop the best proposal for Colorado. During the 2019 legislative session, Colorado lawmakers passed bipartisan legislation directing two state agencies (the Department of Health Care Policy and Financing (HCPF) and the Division of Insurance (DOI)) to develop “a proposal that considers the feasibility and cost of implementing a state option for health care coverage.”
Following a robust stakeholder engagement process, HCPF and DOI sent their final proposal to the General Assembly on November 15, 2019, with recommendations for the legislative changes needed to put the plan into place. The bill introduced this week reflects the analysis and framework outlined by HCPF and DOI.
Overview of the Colorado Affordable Health Care Option
The introduced bill reflects the thoughtful process, and carefully considers feedback from stakeholders, creating an additional affordable choice for Coloradans while recognizing the important work done by doctors, hospitals, and other providers in the state. The legislation includes the following components:
- Eligibility: The plan will be available to consumers purchasing coverage in the individual market, with the intention to expand to small group markets in the future.
- Plan Design and Medical Loss Ratio: Plans will cover all the benefits required by federal law, including the ten Essential Health Benefits, and will cover many services, such as primary care and behavioral health care, before people meet their deductible. This will encourage people to seek primary and behavioral health care without facing a financial barrier. Plans will also be required to spend a larger share of people’s premiums on actual care, with an increase in the medical loss ratio for these plans from 80% to a minimum of 85%.
- Provider Rates: The plan calls for establishing new hospital rates as a major way to lower premiums for consumers. The proposed rates to hospitals are 155% of Medicare, with special attention paid to:
- Critical access and independent hospitals (fewer than 2 locations), with each type receiving 20 percentage point increases in the base rate, or 40 percentage points if they are both a critical access and independent hospital.
- Hospitals who see a high percentage of Medicaid and Medicare patients (i.e. higher than the state average) would receive up to a 30 percentage point increase in the base rate.
- Hospitals that are efficient at managing the underlying cost of care (considering the total margins, operating costs, and net patient revenue) would receive up to a 40 percentage point increase in the base rate.
- Participation by Hospitals and Insurers: Hospitals in Colorado will be required to participate in the plan. Insurers will offer the option in every county where they offer plans, and, in counties where there is only one insurer, the DOI Commissioner may make rules to require issuers to offer plans based on their structure, the number of covered lives, and carriers existing services areas.
- Administration and State Cost: Plans will be offered by private insurance companies that will be fully insured, meaning the issuers, not the state, assume the financial risk. Implementation and operational costs are expected to be minimal to the state.
- Infrastructure: Coverage will be offered through the state’s exchange, Connect for Health Colorado, enabling eligible consumers to continue receiving federal financial assistance. The plan will also be offered outside the exchange for those who do not use it to purchase their coverage.
- Federal Waivers: The legislation gives the state authority to pursue a federal 1332 innovation waiver to provide additional relief to consumers with incomes up to 400% of the federal poverty level, including through additional financial assistance generated by the savings the plan realizes.
- Advisory Board: The option would be created to make recommendations to the DOI Commissioner to develop, implement, and operate the plan. One member would be the Executive Director of Connect for Health Colorado, with other members appointed by various members of the legislature and the Governor. The expertise and experience required to serve on the board would include those who have represented consumers, provided health care in rural areas, and have background in value-based purchasing and plan design, among others.
- Implementation: Coverage will be made available January 1, 2022.
United States of Care’s Take & Role
USofCare believes that states are uniquely positioned to make durable changes to improve health care affordability and accessibility, and we work to support innovative state efforts that align with our mission.
In 2019, USofCare conducted public opinion research in Colorado, with an emphasis on rural areas, to ensure a broad swath of Colorado residents could communicate their needs, fears, and expectations about health care coverage and costs. We shared our findings with the Polis Administration, legislators, and key advocacy partners, which helped inform the Administration’s health insurance option proposal, released in late 2019. In 2020, we have been working closely with the Polis Administration, bill champions Representative Dylan Roberts and Senator Kerry Donovan, and Colorado Consumer Health Initiative, a respected consumer advocacy organization – on a strategic approach to pass the Colorado Health Insurance Option. We believe that the best policy comes from having multiple voices at the table, so during the current legislative session, USofCare has been facilitating stakeholder outreach, coalition recruitment, and providing policy advice through an informal “policy cabinet” of experts in our network.
Additionally, USofCare has retained a local consultant to support the growing coalition with campaign management, strategic advice, and coordinating communication efforts.
In the coming weeks, the General Assembly will continue to debate the Colorado Affordable Health Care Option. We believe creating buy-in options, like the one Colorado is pursuing, is one of many ways states can address the concerns consumers face, including affordability and choice. Colorado’s legislation is an innovative way to address the continuing struggle of people to afford their health care coverage while also building upon what is working. Colorado remains at the forefront of the nation’s states in health care leadership, and we look forward to following its efforts as the Colorado Affordable Health Care Option continues to take shape.