Who’s Actually Affected By The New ‘Colorado Option’ Health Insurance Bill?

· Mar. 5, 2020, 7:58 pm
UCHealth Memorial Hospital Central in Colorado Springs shortly after a temporary lockdown on Monday, Nov. 25, 2019.UCHealth Memorial Hospital Central in Colorado Springs shortly after a temporary lockdown on Monday, Nov. 25, 2019.Dan Boyce/CPR News
UCHealth Memorial Hospital Central in Colorado Springs on Monday, Nov. 25, 2019.

The plan for a law that would make sweeping changes to health care in Colorado has led to years of debate and an expensive advertising campaign from the opposition.

This week, it becomes something more tangible: A bill in the legislature.

“Across the nation, Americans are being ripped off by rising insurance costs, the price of prescription drugs, and a lack of choice in the market,” said Sen. Kerry Donovan, a Democrat from Vail, at the state Capitol on Thursday.

The bill would be one of the first of its kind, following only Washington state. The effort has a long road ahead, including debates in both legislative chambers and critiques from hospitals and health care industry groups.

If it succeeds, the bill could have significant effects on parts of the health insurance market starting in 2022.

What would change for consumers?

The Colorado option, also known as the state option, is an insurance plan that would be run by private companies under strict state requirements.

The most obvious effect is for people who buy insurance on the individual marketplace, who currently number about 400,000. Then there are hundreds of thousands more who don't have insurance at all.

The bill's sponsors have said this new plan would cut premiums by 7 to 20 percent for those individual consumers in some parts of the state. In Grand Junction, premiums could drop by about $120 a month, they said.

“Those on the individual market, those who are uninsured, those who work for a smaller employer, they tend to have some of the higher cost burdens,” said Spencer Budd, policy analyst for Colorado Health Institute. 

The plan aims for savings by giving the state new power over insurers and hospitals. The bill would require insurance carriers to offer up the policy with certain benefits. It would also lower the prices that many hospitals can charge for customers' plans.

Basically, it aims to create a cheaper new insurance option by cutting into hospital profits. It could appear on the marketplace in 2022.

“Every other industry has sacrificed on our path to lowering the cost of health care, and we are bringing hospital systems to the table with this bill,” Donovan said at a press conference.

The state could force hospitals to participate by revoking their licenses or charging $50,000-a-day fines.

What about people with insurance through work?

For now, the Colorado option would only be available for individuals to buy. Later, the plan could be opened to the “small group” market where many small businesses buy their plans. A new advisory board would decide whether to do that.

The bill does not apply to the insurance that many people get through employers. The sponsors claim the effect on them will be minimal.

“We’re targeting the individual market,” said Rep. Dylan Roberts, the Avon Democrat who's cosponsoring the bill. “We think that when you compare the individual market to the much larger insured pool that exists in the state .... that there will not be a negative impact."

Critics have raised concerns that insurers could make up for lost profits on the individual market by simply charging higher rates to other parts of the market instead. The bill tries to avoid that by giving the state insurance commissioner the power to reject rate hikes that are seen as “cost shifting.”

“That’s something the insurance commissioner would be looking out for,” Budd said.

Conversely, Roberts has argued that the bill would create new competition that may result in lower premiums for existing plans.

Will it pass?

Health care reform is a central priority for Democrats, including Gov. Jared Polis. But the bill will face intense debate. A nationally funded group with little financial transparency, Colorado’s Health Care Future, has already poured tens of thousands of dollars into ads against the bill.

The Colorado Hospital Association has pushed back against the bill too, saying that it’s “too narrowly focused” and that other states have failed in their attempts at rate-setting.

“Unfortunately, this plan simply falls short. It doesn't accomplish a lot of the goals they set out to achieve," said Katherine Mulready, the association's chief strategy officer and senior vice president. "It puts a lot of the burden, in fact, all of the burden, according to the actuaries, on hospitals to produce those savings. And we think we need a better solution."

Mulready said that the bill addresses affordability for "too small a slice" of Coloradans, adding that hospitals are still calculating the effects of the new bill.

The Colorado Association of Health Plans objected too, saying it's "fundamentally opposed" to a plan that would "create a health care czar, with unprecedented authority to dictate the product, price and place where we must sell health insurance in the state." The group warned of higher premiums and a destabilized market.

The Colorado Medical Society, a physician organization, said it had no official position yet. It supports the "potential for increased access" and coverage, and the idea of increased competition. But the group is concerned about cost shifting and the effects of rate setting.

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