Colorado's insurance premiums will increase by double digits in the individual pool and by a substantial amount in the small group market next year, rate changes the state released on Tuesday show, leading the trade association for health insurers to argue that the Polis administration "chose politics over math.”
Coloradans face a 7.4% hike in the small group market, which insures companies of between two and 100 employees, and 10.4% in the individual market, which serves people who must pay for their own health insurance, in 2023.
Despite the spike in insurance premiums, the Polis administration insisted that Coloradans will see savings — to the tune of $326 million — and credited its actions for "driving substantial savings." But those savings are primarily through reinsurance and are not included in the information consumers will see when they shop for health insurance when open enrollment starts next Tuesday, Nov. 1.
"Because of the innovative programs the Polis-Primavera administration – in partnership with the legislature – has championed over the last three years," the Colorado Division of Insurance said in a news release, "Coloradans can save $326 million statewide on individual health insurance plans for 2023."
Amanda Massey, executive director of Colorado Association of Health Plans, argued that nearly all of the lowest-cost products in the individual market did not result from the "Colorado Option," but were "built by health insurance providers that continue to offer choice and affordability to Colorado consumers in a time of unprecedented inflation."
"The decisions made by the Polis administration regarding the Colorado Option were fundamentally contradictory to the stated goal of saving people money on healthcare," Massey said in a statement. "The outcome of those decisions are fewer carriers offering individual and small group products to consumers across the state, less competition, and higher premiums. We fully support market-based policies that actually drive down costs, but the result of Colorado’s first-in-the-nation policy shows the Administration chose politics over math.”
Commissioner of Insurance Michael Conway disputed Massey's position.
"In this first year, the compromise we made as part of the legislation was that it was the marketplace's obligation and duty to get to the premium reduction targets. To the extent they failed, going forward, it becomes the obligation of the Division of Insurance to ensure we hit these premium reduction targets and we will follow through on that," Conway said.
The Colorado Option is not just the rates, Conway added.
"It's the insurance companies almost competing against themselves. That's what we're seeing in the rates across the board. That's why people have the ability to shop and find cheaper plans throughout the state. All of those components are working exactly the way we want them to work. In the future, they'll work even better," he said.
Signed into law last year, the Colorado Option is a state-designed health plan that insurers must start offering on Jan. 1, 2023. The Polis administration touted it as a mechanism to bring down insurance costs.
Just how much the premiums will increase in each region of the state is not yet available.
However, Colorado's Health Care Future, a project of Partnership for America’s Health Care Future Action that is funded by the insurance industry, has seen the rates, and said in a news release Tuesday that
- traditional (non-Colorado option) health plans will offer significantly more affordable premiums that are 5% to 10% lower than competing Colorado Option plans, particularly for some Bronze and Silver tier plans that are most popular with consumers.
- in the few counties where the Colorado Option plan is the most affordable option, the difference between the Option plan and traditional plans is less than 1%.
- most counties and entire regions across Colorado – including the West Slope’s individual market Region 9 – will not have access to even one compliant Colorado Option plan.
Conway called the last claim "nonsense." There are Colorado Option plans in every county and in every metal level, Conway said.
“When you peel back the layers, initial review of 2023 premium data suggests that this newly created one-size-fits-all system (of government mandates and regulations) is failing to deliver the savings politicians promised as they rushed to push the new program through the state legislature," the news release said.
The 2023 plans for the first time include the "Colorado Option." Beginning Jan. 1, health insurance carriers must offer the Colorado Option in any county where they also provide health insurance in the individual or small group market.
The Colorado Option will be available for the individual market in Gold (most expensive) and Bronze (least expensive) plans in 63 out of 64 counties, while the Silver tier will be available in all 64 counties, according to the Colorado Division of Insurance.
The agency did not say how many counties will have Colorado Option plans in the small group market, which insures between two and 100 employees.
DOI said that, for individual plans for 2023, "almost all counties will have access to a Colorado Option plan at or below the average premium for that county in each metal level."
Consumers don't shop by "average" premium costs, said Massey of the Colorado Association of Health Plans.
"If people choose the cheapest plan available, it more than likely will not be the Colorado Option plan," she said.
As of this month, at least three carriers have announced they are leaving the Colorado market:
- Bright Health pulled all of its health insurance plans – small group and individual, as well as Medicare – out of Colorado, affecting at least 55,000 consumers in eight mountain counties;
- Humana, which withdrew from the self-insured and small group plans
- Oscar Health, which announced in May it is leaving the individual market
The Colorado Option started off as the more expansive “public option,” which would have been a state-designed and state-run plan. The effort to get it into law took more than two years and two legislative sessions, culminating in its passage in the General Assembly in June, 2021. House Bill 1232 passed on a party-line vote in the House; in the Senate, all but one Democrat voted for it, and all Republicans voted against it.
Setting up a public option plan was a key component of Gov. Jared Polis’ first-term agenda, with the goal of saving people money on health insurance premiums.
Under the law, health insurance providers are required to reduce premium rates by at least 5%, not including medical inflation, beginning Jan. 1, 2023. In following years, the providers are required to reduce premiums by another 5% each year, for a total of 15% by Jan. 1, 2025.
The law tasked the commissioner of insurance with creating a standardized healthcare plan for the individual and small group markets that insurance companies are mandated to offer, and which doctors and hospitals must accept.
Charging the commissioner with creating a health plan raised red flags around conflicts of interest.
The Division of Insurance, under the Department of Regulatory Agencies, is responsible for regulating and monitoring insurance companies, including review and analysis of premiums and policy benefits as well as claims.
Prior to the Colorado Option, the division had never before created a health insurance plan from scratch, and the plan is now subject to regulation by Division of Insurance employees, who work for the commissioner.
If a health insurance provider failed to achieve the premium reduction targets, as outlined in HB1232, they would be allowed to present evidence and offer an explanation in a hearing with the Division of Insurance, which, under the law, has its own mandate to keep the Colorado Option premiums competitive with other plans offered by the health insurance industry.
The law also sets fines for hospitals that refuse to accept the Colorado option plan – at $10,000 per day. After 30 days, the fines go up to $40,000 per day, and state regulators could suspend or impose conditions on the hospital’s license.
In some Colorado counties, little competition between insurers exists, and the Colorado Option would force health insurers to compete, lowering prices across the board, Democrats claimed.
But Tuesday's announcement paints a different picture.
The Division of Insurance made a number of decisions affecting 2023 insurance rates, CAHP said in its statement.
That included "foregoing traditional cost trends in its rate target methodology, undercounting current inflation for Colorado Option plans, underpricing administrative costs for the Colorado Option plans only, and capping profit and contingency rates for health insurance providers at two percent."
"These requirements were on top of new insurance benefit mandate requirements approved by the governor since 2019 that increased the baseline cost of insurance premiums for Coloradans by an estimated 5.5% to 7.9%," the group said.
The Colorado Option, Massey told Colorado Politics, has an administrative cost cap of 85%, compared to 80% for all other health insurance plans.
"The administration is trying to make the product look better but it won’t be the least expensive in the market," Massey said.
Mannat Singh, executive director of The Colorado Consumer Health Initiative, which was a major backer of the Colorado Option law, said in a statement Tuesday that, "after several years of fairly stable health insurance prices, Colorado consumers are going to feel these increases, especially in the rural areas."
"Insurers and hospitals are not making enough of an effort to meet the required reductions for some Colorado Option plans, but are instead setting a baseline for failing to hit the targets without reasonable justification," Singh said.
The group also pointed out that health insurance rates have stayed down in the last few years because of the state's reinsurance program. The Division of Insurance estimated that, in 2023, consumers on the individual market would save an average of 32.1% over what premiums would have been without reinsurance, a way to balance risk within the insurance market. Reinsurance refers to insurance for insurance companies – it helps them pay the largest claims, and, because it's a form of cost-sharing among insurance companies, reduces overall risk for an insurance company. Of the $326 million in savings that DOI touted for 2023, $294 million is tied to reinsurance.
“Health insurance continues to be unaffordable for too many Coloradans, despite reinsurance moderating premium prices and additional plans being offered in more counties,” Singh said. “Premium rates must be reasonable and justified – the industry shouldn’t use the ongoing pandemic or inflation to hike company profits.”
Massey told Colorado Politics that carriers did what they could to meet those targets and lower rates.
"A lot of decisions were made by the administration to make hitting those targets impossible," Massey said.
Savannah Mertens of the Denver Gazette also contributed to this report.
Editor's note: This story has been updated with comments from Commissioner of Insurance Michael Conway. Also, the percentages in the small group and individual markets in the original story were incorrect and have since been updated.