State officials began efforts Tuesday to show off Colorado's first public option health insurance plan, starting with an 8:30 a.m. presentation in Denver at the History Colorado Center.
A 196-page draft report on just how Colorado would implement a public option — a state-directed health insurance plan that would be offered by all health insurance carriers — was released the day before.
However, that seemed to matter little to those in the audience at the museum, since many were representatives of the organizations that have been talking to the Division of Insurance and the Colorado Department of Health Care Policy and Financing (HCPF) about the proposal for the past month.
HCPF Executive Director Kim Bimestefer told the audience Tuesday morning that 18% of Coloradans can't afford health care. That's not just the uninsured, which make up about 6.5% of the population; that also includes people who don't use the health care they have because they can't afford the deductibles.
A recent report by CBS pointed out that some people are buying plans with high deductibles because those plans are cheaper, but then they skip medical care altogether because they can't afford the deductible. High-deductible plans were a rarity a decade ago, according to the Centers for Disease Control and Prevention, but now one in four Americans are covered by such a plan, defined as a plan with a minimum of $1,300 for out of pocket expenses for an individual or $2,600 for families.
That's a piece of the affordability problem that Colorado's State Option is intended to address, Bimestefer said.
A report on the state option was mandated by House Bill 19-1004, which asked HCPF and the Division of Insurance to come up with recommendations on the plan by Nov. 15.
The draft report says the state option plan would be first available to those in the individual market, beginning Jan. 1, 2022. The plan would cap provider rates at 175% to 225% of Medicare rates, although both Colorado Insurance Commissioner Michael Conway and Bimestefer were adamant that the plan also would protect rural and safety-net hospitals that might struggle with profitability, such as Denver Health. At those rates, however, Bimestefer said they are sufficiently high enough to ensure hospitals would be profitable.
Once implemented, the state option would be priced at between 9% and 18% cheaper than what health insurance premiums are expected to be for 2022. The plan would be available through Connect for Health Colorado so that people who qualify for federal subsidies could still use those subsidies to pay for it.
One concern raised in both stakeholder meetings and in Tuesday's presentation: Would the plan be so attractive that individuals would move toward it instead of using employer-provided coverage, for example?
No, Conway said, adding that employer-provided health insurance is still going to be far less expensive than the state option.
Health insurers who provide coverage in Colorado, no matter where, would be required to offer the state option, according to the draft report. That's regardless of region of the state. Conway pointed out that 22 counties have only one health insurer each, but they would all be mandated to offer the state option.
Part of the implementation process also will include monitoring changes in the market. That means that if cost shifting takes place — for example, if insurers start shifting costs from the individual plans to large groups plans — then the state option would be offered to the large group market.
Conway noted that the state option will be most attractive to those who don't qualify for federal subsidies, roughly incomes of $48,560 for a family of four.
Among the big changes for insurers: a requirement that 85 cents on the dollar, not including broker commissions, be used for health care costs. Currently, the federal Affordable Care Act sets that level at 80 cents on the dollar plus commissions. The state option also would require prescription drug manufacturers to pass along certain savings, known as rebates, to consumers, although how that would work has not yet been determined. Bimestefer noted that most insurance companies are already below that 85% rate.
"We're asking what they can do, not the fight for what they won't do," she said.
Conway said the state will seek a federal waiver — known as a 1332 State Innovation Waiver — from the Centers for Medicare and Medicaid Services, part of the federal Department of Health and Human Services. He pointed out that Colorado has already obtained that waiver for its reinsurance program, which goes live next year, and that the state isn't required to seek another waiver.
Conway told Colorado Politics after the hearing that the benefit of seeking the waiver is financial: If granted, the state would be in line for between $70 million and $130 million in federal funds. That money could go for new benefits, like dental coverage, reducing out-of-pocket expenses or expanded tax credits.
Setting rates for hospital providers will address what should have happened under the Affordable Care Act but didn't, Bimestefer said. The ACA was intended to help hospitals address costs tied to uninsured patients, and that has worked. Before the ACA, Colorado hospitals shouldered $700 million in uninsured costs; as of 2016, that was down to less than $300 million. But they took the money they made from those reimbursements, and instead of reducing costs, added administrative expenses or built more hospitals, she said. (Colorado ranks third nationally in hospital construction, according to the presentation.)
Hospital profits are up 50% in the past two years alone, but almost one in five Coloradans report they struggle to pay medical bills.
"Those two things don’t jibe with each other," Conway said. "It's a reflection of a broken system."
As hospitals have merged, it's meant higher prices for people and businesses, according to the presentation. In addition, there's no state standard for hospital prices, and even within systems, prices can vary wildly. Bimestefer pointed out that one hospital in Denver may have one set of prices, and a hospital in the same system in Grand Junction may charge as much as 400% more for the same services.
A "strategic decision could have been made" to reduce cost shifting to employers, given that uninsured debt is going down.
"That did not happen," Bimestefer said. So now, "we have to ask hospitals to make better decisions."
The bottom line is that Colorado is near the top of the list for the highest inpatient and outpatient costs in the country, according to Medicare data.
"We’re hitting profits and areas of opportunity where reasonable reductions [in costs] can take place," Bimestefer said.
The draft report is far from complete, according to Conway and Bimestefer. Over the next three weeks, they're seeking input from health insurers and hospitals to address some of their concerns, and working on an updated actuarial analysis on the plan's costs.
Once the plan is offered in the individual market, they anticipate offering it in perhaps three to four years in the small group market, which covers businesses with 50 or fewer employees, and potentially, the large group market.
Another law passed in the 2019 legislative session boosts transparency of hospital pricing. Once those reimbursement rates are published, employers, or chambers of commerce, for example, could negotiate for the same rates. That's a process already in place in Summit County, through its Peak Alliance program.
Among the audience questions, a cardiologist noted that the plan doesn't address what it would do to encourage doctors to be more price sensitive. That's in the form of ordering tests and other procedures. "I'm one of those who has profited from the system," he admitted.
Bimestefer said that wasn't part of the legislation, and pointed out there are other tools in place to address that issue, and added that the Colorado Medical Society has been asked to "empower physicians" in the area of cost and quality.
Although the initial announcement of the public meetings listed only two, including one in Pueblo later Tuesday, Conway and Bimestefer told Colorado Politics they plan to hold meetings in Grand Junction and perhaps other parts of the state between now and Oct. 25, the end of the public comment period.
The final report is due to the General Assembly by Nov. 15, and Conway said legislation in the 2020 session will be needed to put it into place. However, what might be in that legislation is up to lawmakers, he added.
A study of the state option, conducted by the REMI Partnership, affiliated with the free-enterprise think tank Common Sense Policy Roundtable, pointed out that the state option could result in a loss of 1,500 to 4,500 health care workers in Colorado, aggravating the state's already existing shortage of those workers. Bimestefer pushed back against that claim Tuesday, noting that hospitals are very profitable and insisting the state option would not result in a reduction in the health care workforce.
The REMI study also claimed the state economy would lose up to $919 million in gross domestic product and result in a 5% increase in the cost of healthcare for businesses.
The Colorado Association of Health Plans, which represents the state's health insurance providers, is also watching the draft proposal with a cautious eye.
"We are reviewing these recommendations with our members that include plans that operate across the state and in specific geographic areas," said Amanda Massey of CAHP. She added that they look forward to "ensuring that this proposal does not negatively impact the Colorado healthcare marketplace"