Colorado’s Public Option Proposal is a Promising Approach to Address Consumer’s Concerns

This week, Colorado released their draft proposal to create a state health care coverage option, with the final report due to the legislature on November 15, 2019. This is one of many examples of states leading the way to address issues their residents face, such as affordability and choice. We’re excited to see the positive steps forward on this initiative and many others in Colorado moving concurrently, including addressing surprise billing, instituting caps on insulin costs for consumers, establishing a Primary Care Payment Reform Collaborative, expanding the promising and unique “Peak Health Alliance,” implementing reinsurance, and creating The Office of Saving People Money on Health Care. This blog provides an overview of the draft proposal and offers a perspective on how this can be implemented most effectively. 

Summary of the Proposal 

Through HB 1004, the Department of Health Care Policy and Financing (HCPF) and the Division of Insurance (DOI) were tasked with “developing a proposal that considers the feasibility and cost of implementing a state option for health care coverage.” The goal of this initiative, like other buy-in options, is to leverage existing state infrastructure to provide more affordable choices to consumers. The legislation in Colorado specifically includes provisions for DOI and HCPF to address a number of key questions, including who will be eligible and how to best design the plan. The proposal addresses those questions the following ways:

• Eligibility: The plan will first be available to consumers purchasing coverage in the individual market, with the intention of expanding to small group markets at a later date. The Administration expects this to help consumers in the 22 counties in the state with only one issuer. 
• Consumer Savings: Consumers are expected to save between 9 and 18% on their monthly premiums, with exact estimates varying depending on where provider rates land in the final proposal. 
• Provider Rates: The proposed rates would set a benchmark between 175-225% of Medicare reimbursement rates, a proposed reduction from the current reimbursement rate of approximately 289% of Medicare. There will be special attention paid to rural and critical access hospitals to ensure these rates are sustainable. 
• Plan Design: Plans will cover all the benefits of marketplace plans, including the ten Essential Health Benefits, and will cover many services, such as primary care and behavioral health care, before people meet their deductible. 
• Infrastructure: The proposal calls for coverage to be offered through the state’s exchange, Connect for Health Colorado, enabling consumers to continue to receive federal financial assistance. The plan will also be offered outside of the exchange for those who do not use it to purchase their coverage. 
• Federal Waivers: The proposal recommends the state pursue a federal 1332 innovation waiver to provide additional relief to consumers, including through additional financial assistance generated by the savings the plan realizes. 
• State Role and Cost: HCPF and DOI will oversee and set the standards for the state option. Implementation and operations costs are expected to be minimal.
• Administration: Plans will be offered by private insurance companies that will be fully-insured, meaning the issuers, not the state, take on the risk. In order to increase competition, all insurers over a certain size will be required to provide the state coverage option. 
• Affordability: The proposal defines affordability in a way that is inclusive of out-of-pocket costs, premiums and consumers’ ability to pay for coverage without giving up other needed household priorities.
• Implementation: Coverage will be made available January 1, 2022. 

Our Take

We believe creating buy-in options, like the one Colorado is working to implement, is one of many ways states can address the concerns consumers face. To better understand the local needs and challenges specific to Colorado, we conducted public opinion research across the state in the lead up to the proposal’s release. Many of these findings are in line with what we know to be true — health care is top of mind for consumers and is a kitchen table issue affecting people from all walks of life. Our research found: 

• Increasing costs and lack of transparency embedded throughout the process drive dissatisfaction among consumers and makes them question the value of their insurance; 
• Access to care is influenced by geography and is seen as an affordability issue when time off work, travel, and child care to get to an appointment are taken into account;
• The cost of health care exceeds what consumers think is reasonable and they are willing to consider a governmental role in addressing this; and
• Consumers want plan and benefit design information to be easily understandable.

Colorado’s proposal is a promising approach to address consumers concerns and build upon what is working. For example, providing coverage through Connect for Health Colorado will be provided in a system that is well-known and successful in Colorado. Further, creating broad-based eligibility across the state means more people can reap the benefits of the new option, particularly people in rural and mountain areas of the state with limited coverage options and high costs. The draft proposal also takes the approach of other states that have explored this, by starting with the individual market before expanding the state option to the small group market.  

The proposal takes into account people’s desires to have plans with benefits they can understand by including important services, like primary care, preventive care, and behavioral health outside of the deductible. This means that people can access this important care for themselves and their families without needing to worry about paying their annual deductible first. The plan could ultimately include other similar “high value” services outside of the deductible as well. 

Even with these exciting elements, it is important to remember that other state and federal dynamics may impact the ultimate implementation of the proposal. For example, state dynamics in Colorado, such as the Taxpayer Bill of Rights (TABOR) law, currently make providing additional financial assistance with state dollars difficult. Thus, even with the best of intentions, the state agencies were limited in their ability to propose palatable solutions for making coverage substantially more affordable without proposing to seek federal funds through a federal State Innovation Waiver (Section 1332 waiver). However, approval of this type of waiver is uncertain and can take time. While learning from other effective state policies and programs, such as the ConnectorCare program that provides additional financial assistance to consumers in Massachusetts, can be instructive, tradeoffs and decisions ultimately need to be made based on what is felt and feasible locally. 

Because so many individuals and stakeholders are affected by decisions that policymakers make, there are rarely clear cut answers to these kind of hard policy debates. The state grappled with tough decisions, such as deciding appropriate rates to pay the many hospitals currently receiving reimbursement rates substantially higher than Medicare. In this case, consumers want low costs so they can access the care they need, but establishing too low of a reimbursement rate for that care may mean some providers do not participate in insurance networks, leaving consumers with limited or no access to affordable care. The state’s response to proposed rates seeks to balance provider and consumer concerns and come up with a sustainable solution. 

What’s Next?

To help inform these and other issues, HCPF and DOI engaged stakeholders in the development of the proposal and conducted stakeholder meetings across the state to ensure a wide range of perspectives were provided. Our public opinion research, unsurprisingly, found that consumers want their voices to be heard and want a champion for their needs, so we encourage all stakeholders to provide feedback by October 25 on the proposal before it is finalized November 15. Incorporating that feedback into the final report will be paramount to ensuring the plan best meets consumer needs and becomes an effective option for residents of Colorado. 

Once the final proposal is submitted to the Legislature, HCPF and DOI have the ability to move forward with implementing the proposal, unless the Administration needs additional statutory changes or funding. Notably, any legislative efforts will need to balance the appetite of lawmakers to prioritize the state option among other state challenges like affordable housing, environment, and a fragile budget forecast. The state option will also need to take into account other long-standing dynamics, particularly if policymakers want to provide additional support to consumers to address care and coverage affordability beyond the estimated savings generated by the new state option.

Colorado remains at the forefront of state leadership in health care innovation and the draft proposal is a promising start to find solutions that put people’s needs first to improve access to affordable care.