Colorado Public Health Insurance Option

Colorado Democrats have introduced their long-awaited bill to create the public option, a state-controlled health insurance plan.

The authors of the bill – HB 1349 – argue it will lower the cost of insurance in Colorado’s individual market. But the text of the bill concedes a major problem, first identified by an actuarial firm hired by the Polis administration, about the way the public option is designed: It will increase the cost of insurance for many, if not most, households in the individual market.

The bill, introduced by State Representatives Dylan Roberts and Chris Kennedy and State Senator Kerry Donovan, directs Colorado Insurance Commissioner Michael Conway “to mitigate any adverse impacts the Colorado option plan has on the purchasing power of exchange consumers whose income is up to four hundred percent of the federal poverty line.”

This is a reference to individuals and families who receive tax credits under the federal Affordable Care Act to reduce the cost of their insurance premiums. The subsidies help middle-class and working-class families making less than 400 percent of the federal poverty line. For a family of four in Colorado, this means roughly $100,000 per year or less.

According to 9News, there is “concern that the bill will increase premiums for those that have government subsidized healthcare premiums” following an actuarial study commissioned by the state Division of Insurance and the Department of Healthcare Policy and Financing.

The actuarial study, released in late February, found the public option would cut the federal tax credits for households in the individual market, meaning “subsidized members who choose to remain in their current plan, rather than switching to the Colorado Health Insurance Option would see an increase in their net premium after subsidy.”

The public option could also drive up premiums for employer-provided insurance. Officials with Children’s Hospital Colorado told CBS News that the public option would be funded by cutting payments to hospitals for treating patients. This could force unpaid expenses to be shifted from the public option into employer-provided insurance.

The authors of HB 1349 are “coming after hospitals for what is a much larger health issue,” Heidi Baskfield with Children’s Hospital told CBS.

The same news outlet also flagged a provision of HB 1349 which is designed to force the participation of hospitals in the public option, despite their concerns about its unpaid expenses. “Under the bill, the state would force insurance companies to sell the plan in every county and every hospital would accept it or risk losing their license,” CBS reported.

The section of HB 1349 dealing with possible resistance to the public option says the Polis administration “may suspend, revoke or impose conditions on the hospital’s license” as punishment, along with fines ranging between $10,000 and $40,000 per day.

The threat of revoking hospital licenses can be traced back to the Polis administration, which also supports the public option. “What we are recommending is that we have the tools to mandate hospital participation,” Conway said during an October 2019 hearing on the Polis administration’s preferred design for the proposed public option.

Independent of this threat, a recent study has warned that 23 rural hospitals across the state face a higher risk of closure due to budget cuts triggered by the Colorado public option, Becker’s Hospital Review reported in January. The same study concluded more than 80 percent of hospitals across the state would see budget cuts under the proposal.

In early March, the Denver Business Journal analyzed the proposed formula for hospital payments under the public option and also concluded “most hospitals will be seeing cuts.”

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