Cover Story Rural Health Care

An employee of Connect For Health Colorado, the state's health care exchange, explains options and procedures to a client signing up for insurance, in Denver, in a 2014 photo. 

A Democratic state lawmaker hopes a bill approved by the House Health and Insurance Committee Wednesday will lower the cost of health insurance premiums for Coloradans "who just can't take it anymore."

But the measure is opposed by hospitals — particularly in rural Colorado  that don’t want to see their provider rates cut.

House Bill 1168 would set up a "reinsurance" program that could lower health insurance premiums for individuals on the Western Slope and in rural Colorado by as much as 35 percent, and for urban Coloradans by 20 percent, Rep. Julie McCluskie of Dillon said at a Wednesday press conference.

Between Medicaid, Medicare, private employer-paid insurance and the individual market, the state is down to an uninsured rate of around 6.5 percent, although it’s much higher in places like Summit County, at around 14 percent. But it’s that individual market, where people buy their own health insurance, that is the most price sensitive, McCluskie said.

McCluskie was joined at the press conference by a bevy of lawmakers, as well as Gov. Jared Polis and Lt. Gov. Dianne Primavera, whom Polis has put in charge of the newly created Office of Saving People Money on Health Care.

McCluskie and others claim that a reinsurance program  basically, an insurance program to cover high-cost claims for insurance companies  would drive down health-care costs and, eventually, health insurance premiums.

It works like this: Insurance companies set their rates based on claims paid. Those claims are based on rates negotiated by health insurance companies with the health care providers.

The reinsurance program works by paying a lower rate to providers that will be decided based on the Medicare payment rate. The amount paid will be higher than what Medicare pays. Because provider rates will be lower for a portion of some claims, insurance companies won’t have to charge as much for premiums. That means consumers pay less for their insurance.

Colorado’s reinsurance program would tap into federal funds available for innovation through the Affordable Care Act. Seven states have already obtained federal waivers for their reinsurance programs  notably, Minnesota, where health insurance costs decreased by 11.3 percent, and Alaska, which saw a decline of 26 percent.

The program contained within House Bill 1168, however, is unlike programs approved by the federal government for those other states, which have tapped their general funds or levied fees on the business community. That’s not going to happen here, Polis indicated Wednesday.

“This can be done without fees or taxes,” he said.

Colorado’s program would lower costs by capping what will be paid to providers such as hospitals and doctors. Supporters believe only a small percentage of claims would hit the level that would trigger a reinsurance provision. For example, for a $100,000 claim, the insurance company would pay $25,000, and the reinsurance pool would cover 50 percent of the rest.

According to Commissioner of Insurance Michael Conway, who testified during Wednesday’s hearing, costs would be based on a “Medicare referenced-pricing system.”

That system, which is managed by the federal Centers for Medicare and Medicaid Services, sets rates based on physician recommendations. It takes into account variables such as geographical location, the complexity of a treatment or procedure, and a factor for hospitals that treat a disproportionate share of uninsured patients or those on Medicaid. Under House Bill 1168, the commissioner of insurance would use that information to set provider rates.

Health care providers have complained for years that Colorado doesn't cover enough of their costs for Medicare and Medicaid patients. According to Conway, provider rates could be set at 150 percent to 200 percent of Medicare rates and still save the state millions of dollars that, in turn, could be used to fund the reinsurance pool. 

Conway noted that Colorado hospitals’ profit margin was well above $1.2 billion in 2017, almost triple what it was just 10 years ago.

“I don’t begrudge” hospitals making a profit, Conway told the committee, but it shows that the system is bloated. The reinsurance program would tap into the “fat” in a system “that’s very fat.”

In 2017, $18 billion was paid into Colorado’s hospitals. About 9 percent of that, according to Conway, was for an undefined “other” category. That’s about $1.5 billion, he said. “There’s room to take money out of the system to help Coloradans.”

Those who've experienced high health insurance premiums testified about the horrors of high health care costs. Carrie Brown of Summit County said her entire paycheck goes to pay for her family's health insurance. They briefly considered dropping their health insurance, but a recent emergency  her daughter snapped her femur in a ski accident  made them commit to never going without.

But she and her husband don't have any hopes of retiring anytime soon, she said.

Summit County Commissioner Thomas Davidson said her county is one of the most expensive places for health insurance in the entire nation, and has been since 2012, when the Affordable Care Act went into effect.

"We see no end in sight. It's devastating our working families" who choose to go without health care and show up at the local clinic to beg for mercy, he said.

"This [bill] needs to go forward. ... We should not be distracted by a few rural hospitals" and instead look at the hospitals with huge profit margins. 

Janie Wade of SCL Health, which operates hospitals mostly along the Front Range as well as in Mesa County, told the committee that “we recognize health care costs are unsustainably high,” but funding the reinsurance program envisioned in House Bill 1168 solely through cuts to hospitals and physicians is not the way to do it.

“We won’t know when patients hit the attachment point,” Wade said. That’s the maximum rate for a service set by the insurance commissioner.

“Those who bill earlier will be paid more and those who bill later, when the patient is the sickest, will be paid less. ... This process is too rushed.”

Wade asked that the committee delay the bill.

“'See how it works and fix it later’ is dangerous to our communities and patients” and could hurt the sickest patients the most, she said.

The Colorado Hospital Association, which represents 110 hospitals, also opposes the bill, according to Katherine Mulready, although she acknowledged health care costs have reached a crisis point, and reinsurance is a good solution in the short term, she said.

The legislature should pass a bill this year that takes effect in 2020. The only thing that’s controversial is how the state will pay it, she said.

But “what problem are we trying to solve?” she asked. Cutting payments to hospitals and doctors doesn’t solve the problem, and there are too many unanswered questions, particularly without an actuarial analysis, she said.

That analysis is expected sometime next month.

Allowing the state to arbitrarily set rates means providers will face significant cuts with unintended consequences, Mulready said. They will have to reduce services, cut staff or increase costs for those with employer-sponsored insurance. There’s no way to set up a rate structure in a matter of weeks or months.

“We support reinsurance but not the financing model," Mulready said.

She also pointed out that 17 percent of health insurance premiums went back to shareholders in the form of profits, but hospitals operate at a lower profit margin and some -- frequently rural -- even lose money. For those facilities, only investment income keeps them in the black, according to one witness.

Then there’s the question of the federal waiver. Conway said there are four criteria to meet the federal guidelines and believes that House Bill 1168 would meet that criteria. He also pointed out that Polis has been meeting with federal Health and Human Services officials to discuss Colorado’s program.

However, Mulready told Colorado Politics on Wednesday that the federal government has never approved a program like Colorado's. A model that has both the hospitals and health insurance companies at the table will be a more reliable way to gain approval from the Trump administration.

"No other state has tried to fund insurance through provider-rate setting," Mulready said. "I don't think the Trump administration will appreciate it. ... There's a hope it will fly, but hope is not a strategy."

The bill does create a carve-out for rural hospitals that have small or non-existent profit margins and could lose money under the program. But the rural hospital representatives said how that would work is not clear in the bill. 

The bill has a five-year sunset provision, meaning it would expire in five years unless reviewed and reauthorized.

“Let’s not implement this without the opportunity to renew it or even repeal it if it doesn’t work,” said sponsor Republican Rep. Janice Rich of Grand Junction. 

The committee voted 8-2 to approve the bill and send it on to the House Appropriations Committee.

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