The Ongoing Disagreement Between Polis And Hospitals Over Reinsurance Just Boiled Over Into The Courts

Children's Hospital Colorado
Hart Van Denburg/CPR News
Children’s Hospital Colorado at the CU Anschutz Medical Campus in Aurora, Aug. 30, 2019.

Colorado hospitals are suing the state over payments to the fund that pays for Colorado’s reinsurance program.

The hospitals and the state have been tangling publicly for months as Gov. Jared Polis’ administration looks to craft ambitious health care reforms. 

The sides have scuffled over the specifics of how to pay for them, and the suit is just the latest salvo in the conflict. The state’s reinsurance program, which is essentially insurance for hospitals to cover the costs of the most expensive patients, went into effect last year.

The Colorado Hospital Association filed the complaint on Tuesday against state Insurance Commissioner Michael Conway and the Colorado Division of Insurance. The hospitals are challenging an “emergency regulation” they say was filed on Christmas Day and became effective New Year’s Day. The complaint said it was filed with “no input or public comment” and was in “direct violation” of the state's rules.

According to the filing, the regulation makes all Colorado hospitals select a payment method by Wednesday, Jan. 15, for each hospital’s share of a $40 million special fee assessment and pay it by June of this year.

The hospitals maintain that the law that created the state’s reinsurance program only authorized the commissioner to assess the fee for fiscal years 2020-21 and the next year, starting at the beginning of July. The hospitals believe the new regulation essentially requires payment a year ahead of schedule.

“I don't think it's any secret that we have a lot of disagreements with the Polis administration, but this isn't political,” said Katherine Mulready, CHA’s senior vice president and chief strategy officer.

Mulready said the complaint was filed to insure the integrity of the legislation that was authorized by the general assembly. She acknowledged that the law does require hospitals pay $40 million a year, but not yet.

Some smaller, rural hospitals, as well as Denver Health, might struggle to pay their share of the assessment earlier than expected, Mulready said.

The total cost for the first year of the state’s reinsurance program is $260 million.

The CHA maintains the state hasn’t yet published how much each hospital owes.

The Colorado Division of Insurance declined an interview request, saying it couldn’t comment because the case is now in ongoing litigation.

Assistant Commissioner Vincent Plymell said in a statement that the division is “disappointed” the Colorado Hospital Association has taken this step, which is “clearly motivated by protecting their bottom line.”

The hospitals were “unfortunately, attacking a program that is working and will save Coloradans thousands of dollars this year on their health care,” Plymell said. The division is ready to defend the program “so that Coloradans can finally stop being ripped off on health care,” he continued.

The state sent out a request for comment for a “draft emergency regulation” to set up the “process and procedures” for the assessment and collection of special fees from hospitals for the reinsurance program on Dec. 25. It said comments were due on Jan. 3.

The hospitals say the regulation also authorizes state insurance regulators to “revoke or suspend a hospital’s license for non-compliance.” That authority was never granted by either state law or the Colorado Reinsurance Program Act, according to the complaint.

In his annual State of the State address last week, Polis sharply criticized the hospitals over their high profits at a time of rising health care costs. Polis said his administration was pursuing a public option that could save Coloradans money on their individual premiums, especially those in 22 rural Colorado counties where there’s now just one insurer and “no choice.”

“We know there are powerful special interests who have a financial stake in preserving the current system,” said Polis, noting that Colorado has the second-highest hospital profit margin in the U.S. 

He also said Front Range hospitals with more than $2 billion dollars in profits in 2018 “are already using those profits from overcharging patients” to run ads against legislation the administration favored “that could save families money.”