Colorado’s Public Health Care Option Moves Ahead After Hospital Negotiations Break Down

A negative pressure room inside St. Joseph Hospital, March 10, 2020.
Kevin J. Beaty/Denverite
A negative pressure room inside St. Joseph Hospital, March 10, 2020.

Colorado lawmakers will push ahead with one of the nation’s most ambitious health care proposals after a potential deal with hospitals failed this week.

The “Colorado option” bill would create a state-run insurance plan and mandate lower costs at hospitals by 2025 unless the private market finds ways to significantly reduce insurance costs first.

The bill is headed to an important committee hearing on Friday after several delays as backers worked behind the scenes on a compromise with the Colorado Hospital Association, one of the most influential health industry groups in the state. 

“I thought we were on the precipice of a larger deal, but the hospital association walked away from negotiations last night,” state Rep. Dylan Roberts, a Democrat from Avon, said on Thursday.

The CHA now says it opposes the bill but supports the idea of lowering costs. CHA and other industry groups negotiated for weeks on the bill, including at a recent 10-hour session, said Katherine Mulready, chief strategy officer for the organization.

“I don’t think it’s fair to characterize either side as walking away,” Mulready said on Thursday. “We hit a stumbling block yesterday and we hit a place where we didn’t think we had any more creative ideas to throw at the problem in the timeline that was being provided.”

How negotiations broke down between the legislature and the health industry.

The two sides were discussing a compromise that would have eliminated the possibility of a state-run insurance plan. Instead, the proposal would have set cost reduction targets and given the state the authority to limit payments to hospitals, along with other new powers over insurance companies. It also would have offered new options for providers, Roberts said.

“I offered to take the entire idea of a public plan off the table if we could come to some sort of compromise, and they turned us down,” Roberts said.

Negotiations broke down over the proposed cost reductions, Mulready said. She claimed the plan would have ultimately reduced payments to hospitals too sharply. Roberts said that the amount was reasonable and that he hadn’t heard of a number as dramatic as the ones that industry officials now are citing. The proposal would have allowed higher payment rates for rural and critical-access hospitals.

The governor’s office and the state Department of Insurance had been closely involved in the negotiations, Mulready said. But with the failure to reach a deal, the CHA moved to formally opposing the bill.

“The industry is united in opposition to the introduced version,” Mulready said.

Roberts and the other sponsors, state Sen. Kerry Donovan and state Rep. Iman Jodeh, still plan to introduce amendments in response to recent concerns.

As Colorado Democrats prioritize health care reform, state Republicans worry about government overreach.

Democrats have made health care reform a central priority during Gov. Jared Polis’ first term. The sponsors describe it as a way to slow the growth of health expenses that have eaten up more and more of Americans’ incomes. It’s also meant to ensure that affordable insurance plans are available in the state’s rural communities.

Only one state, Washington, has enacted this kind of “public option” program. In a legislative session packed with big bills and big spending, such a change could bring some of the most sweeping effects for Colorado’s residents.

The bill would require the private industry to make plans available in each county that would drop insurance costs 20 percent by 2024, compared to the local costs for 2021. If insurance companies can’t hit that target, the state would create a new quasi-governmental authority that would sell health insurance plans, starting in 2025. 

For the proposal’s critics, that result would be a vast government overreach. State Rep. Mark Baisley, a Republican, pointed to the bill’s reference to “police power” to justify the legislature’s intervention in health care. (Police power is lawmakers’ ability to enact laws for the public good, even if it affects individuals’ rights.)

“That kind of lays down the attitude that is behind this bill: the police powers that come from the state to effectively take over health care in the state of Colorado,” Baisley said. “What has given consumers in every industry the greatest product and price and delivery is the free market.”

Insurance companies would not be able to compete with a state-backed option, he argued. And he said that new limits on health care costs would discourage medical professionals from working here.

“They’re going to have to conscript, I guess, the medical providers throughout the state to become subjects of the state to provide all that,” he said. Another major industry group, the Colorado Association of Health Plans, has described the Colorado Option as a dangerous path to “a “government-run single payer health care system.”

Democrats respond that the state can’t afford not to do something about increased health care costs, especially for families and in rural areas. For example, the average family premium for those with employer-backed coverage had risen to more than $20,000 per year by 2019, a 51 percent increase from 2010, according to a state report.

“There are too many Coloradans right now who cannot afford health insurance, and that is especially a problem in the midst of a pandemic,” Roberts said.

The rate of people who are uninsured in Colorado ranges as high as about 14 percent along the I-70 mountain corridor, while it’s much lower in the metro area, according to a 2019 report from Colorado Health Institute.

But Colorado’s health costs also have shown signs of improvement. A benchmark of premiums dropped by about 27 percent in 2020, and a smaller amount in 2021, according to Kaiser Family Foundation. The Colorado Health Institute attributed most of those gains to another recent state law, the reinsurance program.