State Success Story: Colorado’s Milestone Health Care Affordability Law

USofCare is honored to have been part of a diverse coalition of consumers, patients, clinicians, business owners, and advocates who worked with legislative champions to support a major affordability law that takes lessons learned from Washington’s Cascade Care and builds on previous state investments. This multi-year effort, which endured through a legislative session suspended by the pandemic, finally resulted in Governor Jared Polis signing a monumental bill, the Colorado Standardized Health Benefit Plan Act (HB21-1232) into law this month. 

This plan, dubbed the ‘Colorado Option,’ has great potential to expand access to high-quality, affordable health care to all Coloradans. It also follows Nevada’s recent passage of a public health insurance option, which too aims to provide a state-based solution to providing more affordable coverage.

What the bill does 

Similar to Washington’s Cascade Care, the Colorado Option will rely on health insurance companies to offer plans to consumers in the individual and small group markets. This is intended to create more competition and lower costs for people. This new law is expected to reduce costs, shrink uninsurance rates, and flatten health disparities for individuals, families, and small businesses across the state. The following provisions of the bill work toward these goals:

• A standardized health benefit plan, which can help reduce consumer confusion and make shopping easier, and provide more pre-deductible coverage for routine services, like primary care and generic drugs. The plan will be created through a stakeholder engagement process that includes health care providers, industry and consumer advocates, and community representatives. The standardized plan will be made available on the state’s individual and small-group markets beginning January 1, 2023.
• All Colorado insurance carriers will be required to offer the Colorado Option in any individual and small-group markets where they already offer plans.  
• The Colorado Option will be presented at a more affordable cost and will become even more affordable over time, requiring plans to meet 15% premium reductions over the course of three years. If plans do not meet these targets, they will be subject to specific reviews of their rates and public hearings held by the Commissioner of Insurance. 
• The network for the Colorado Option will be robust, with a specific first-in-the-nation approach to  ensuring culturally responsive networks, reflecting the diversity of its enrollees. It’s also set to include nearly all essential community providers in the plan’s network. Plans will also be required to take steps to reduce health disparities and work towards health equity. 
• If plans are unable to meet the premium reduction targets, they will be subject to a public hearing process. As one outcome of that hearing process, the Commissioner of Insurance has the authority to set reimbursement rates:
  • Providers will be paid at least 135% of Medicare rates within the applicable region for the same services.  
  • Hospitals — namely essential access, independent, and pediatric specialty hospitals, along with those that serve large proportions of Medicare and Medicaid beneficiaries — will all receive increases in their base reimbursement rates, none of which can fall below 165% of Medicare rates.  
• Any provider that does not accept the standardized plan or the law’s reimbursement rates will be held accountable through participation in a public hearing, potentially followed by fines or other disciplinary actions from the Commissioner of Insurance.
• The state will apply for a state innovation waiver which, if approved, will result in federal pass-through funding that can be used to provide even more financial assistance to Coloradans. 
• The bill appropriates $1.4 million to the Department of Regulatory Agencies for the implementation of the Colorado Option during the 2021-22 state fiscal year.

The bill establishing the Colorado Option includes several additional measures that will make health insurance more accessible, affordable, and equitable. These include the founding of a diverse advisory committee — whose members have personally faced barriers to accessing health care — to aid in the plan’s implementation. It also creates a new insurance ombudsman, who will serve as a consumer advocate for Colorado Option enrollees. 

Across the country and in Colorado, lowering health care costs is a top priority for Americans. Reducing premiums by 15% over three years and further reducing cost-sharing burdens through standardized plans are significant wins for people. In addition, the Colorado Option approaches health equity in an innovative way and should be one for other states and Congress to watch. Expansion of state coverage, especially through thoughtful plan design, provides a real opportunity to reduce health disparities and build health equity within the system. 

USofCare has been on the ground working alongside state partners since 2019. Our team has provided strategic and financial support as well as technical assistance and best practices from years of experience. We are immensely proud of the coalition for their years of work to pass this important legislation. We are also inspired by the leadership and dedication of legislative champions who kept stakeholders at the negotiation table, ensuring that voices from diverse perspectives were listened to and represented, and in the end, passed legislation that meets Coloradans’ needs by providing better access to more affordable health care.

Last updated on 2/23/23 at 9:51 am ET