Isabelle Nathanson, Outreach and Organizing Coordinator
Rising premiums, deductibles, and other out of pocket costs pose significant access issues for Coloradans seeking to use health insurance to protect their physical, mental, and financial well-being. This is especially true for those who buy their health insurance on the individual market through Connect for Health Colorado. New, affordable coverage options created through Colorado’s state option for health insurance could provide a solution by increasing competition and addressing the underlying costs of health care.
Scope of the Problem:
Although more Coloradans have gained coverage as a result of the Affordable Care Act,[1] Colorado residents have also seen their premiums and out of pocket costs climb.[2] As a result, the majority of those who remain uninsured cite cost as the reason,[3] and many insured Coloradans struggle to pay for their out of pocket costs.[4] Thankfully, in 2020 the state’s reinsurance program will lower premiums significantly, with average premium reductions of 20% across the state.[5] However, a longer-term solution remains necessary to curb the underlying high cost of health care and its effects on consumers.
The underlying cost of health care, which includes things like hospital[6] and prescription drug[7] prices, continues to grow. These costs are passed on to those paying for health care, including government entities, health insurance companies, employers, and others.[8] For example, hospitals in Colorado are some of the nation’s most expensive,[9] accounting for 34 percent of total health care spending in Colorado.[10] Furthermore, higher hospital prices in Colorado do not reflect or predict higher quality for all services[11]. As a result, when health insurance companies reimburse hospitals’ high prices, they subsequently pass on this spending to consumers in the form of higher premiums and out of pocket costs. Accordingly, about 35 percent of premium dollars are spent on hospital costs.[12] As a result, when the underlying costs that health insurers have to pay rise, consumers absorb the increase.
Although financial assistance may be available to consumers to help pay for health insurance, these solutions do not address the underlying costs of health care, nor do they address access to affordable health care and coverage for all Coloradans. For example, consumers buying individual plans through Connect for Health Colorado may qualify for tax credits and cost sharing reductions to help pay for their premiums and out of pocket costs.[13] However, those who don’t qualify for financial assistance or other health insurance programs often face incredibly unaffordable options for health insurance, and many choose to go uninsured as a result.[14] Others who are insured and who may receive tax credits can still face high out of pocket costs such as deductibles and coinsurance. High deductible plans have been found to result in limited access to needed appointments and/or medications.[15] Out of pocket costs also contribute to financial instability for many. For example, 18 percent of Coloradans had problems paying medical bills in the past year.[16] Accordingly, affordability and access to health coverage and care remain out of reach for many Coloradans, even those who are insured.
Affordability also varies geographically in Colorado. In 2019, 22 counties had only one insurer offering plans on the individual market.[17] The high uninsured rates in rural counties with few options for health insurance, like Yuma, Eagle, and Montrose, show the impact of unaffordable options. For example, the uninsured rate in Eagle county was 14.3 percent in 2019, compared to the statewide average of 6.5 percent.[18] In general, a lack of competition among insurers and hospitals, specifically in rural areas, leads to higher premiums.[19] Innovation targeting competition, affordability, and the underlying costs of health care would greatly benefit many Coloradans.
Potential Policy Solutions:
In order to tackle rising health care costs and a lack of competition in the individual market, HB19-1004 was passed during the 2019 legislative session to create a public option for health coverage in Colorado. It tasked two state agencies — Colorado’s Division of Insurance (DOI) & Department of Health Care Policy and Financing (HCPF) — with creating a proposal for a new health insurance coverage option for Coloradans.[20] The plan was required to 1) build on existing state infrastructure, 2) increase health insurance affordability, 3) create more competition in Colorado’s individual health insurance market, and 4) control underlying costs of health care in Colorado.
A robust, statewide stakeholder engagement process influenced the draft report released October 7th.[21] Its recommendations include ways to implement the public option and achieve the goals of increased affordability and competition in the insurance market. The released draft proposes creating affordable, transparent, and accountable new coverage options to be offered by private insurance carriers. Insurers would administer the plans and bear the financial risk, while the state would design the standard benefits to be included. The plans would be offered both on Connect for Health Colorado and off-exchange to increase access for all residents of Colorado — including undocumented immigrants. In order to control the underlying costs of health care, the plan proposes limiting rates paid to certain providers, including hospitals, resulting in predicted 9-18% premium reduction after implementation. A final report will be presented November 15th to the Colorado General Assembly detailing the implementation plan of a state option for health insurance in Colorado. Further legislation, regulation, and waivers submitted to the federal government will most likely be needed to ensure full implementation of the plan.
Conclusion:
As Colorado
continues to innovate on health care policy, it is crucial that residents,
industry, and lawmakers understand the potentially positive impact of the
proposal. Colorado’s design for a state option for health care is pushing
diverse stakeholders to creatively devise solutions to address access to
affordable health care in Colorado. The public-private partnership for health
insurance outlined in Colorado’s proposal could be a much-needed catalyst for
attacking high health care costs at their root in order to save both consumers
and the State of Colorado money on health care.
To take action on Colorado’s state option for health insurance, click here.
[1] 2019 Colorado Health Access Survey: Progress in Peril. (2019, September 25). Retrieved from https://www.coloradohealthinstitute.org/research/CHAS.
[2] Affordability in Colorado. (2018, December 14). Retrieved from https://www.coloradohealthinstitute.org/research/affordability-colorado.
[3] 2019 Colorado Health Access Survey: Progress in Peril. (2019, September 25). Retrieved from https://www.coloradohealthinstitute.org/research/CHAS.
[4] 2019 Colorado Health Access Survey: Progress in Peril. (2019, September 25). Retrieved from https://www.coloradohealthinstitute.org/research/CHAS.
[5] Health Insurance Plan Filings and Approved Plans. (2019, October 10). Retrieved from https://www.colorado.gov/pacific/dora/health-insurance-plan-filings-and-approved-plans.
[6] As their revenues grew, Colorado hospitals pushed costs onto privately insured patients and reaped billions, according to a new state report. (2019, January 24). Retrieved from https://coloradosun.com/2019/01/24/colorado-hospitals-cost-shift-report/.
[7] Charles, S., & M.d. (2019, May 31). No end in sight to rising drug prices, study finds. Retrieved from https://www.nbcnews.com/health/health-care/no-end-sight-rising-drug-prices-study-finds-n1012181.
[8] The Cost Shift Myth. (2019, February 13). Retrieved from https://www.coloradohealthinstitute.org/research/cost-shift-myth.
[9] White, C., & Whaley, C. (2019, May 9). Private Health Plans Pay Hospitals Much More Than What Medicare Would Pay. Retrieved from https://www.rand.org/pubs/research_reports/RR3033.html.
[10] Budd, S. (2019, October 2). The Hospital Transformation Program. Retrieved from https://www.coloradohealthinstitute.org/research/hospital-transformation-program.
[11] Colorado Hospital Value Report – Benchmarking Pricing & Quality Reliability for Inpatient Care Across Acute Care Hospitals. (2019, July 3). Retrieved from https://www.quantros.com/colorado-hospital-value-report/.
[12] Health Care Costs 101. (2019, April 24). Retrieved from https://colohealthplans.org/health-care-costs-101/.
[13]Get Financial Help • Connect for Health Colorado. (n.d.). Retrieved from https://connectforhealthco.com/financial-help/get-financial-help/.
[14] 2019 Colorado Health Access Survey: Progress in Peril. (2019, September 25). Retrieved from https://www.coloradohealthinstitute.org/research/CHAS.
[15] Agarwal, R., Mazurenko, O., & Menachemi, N. (2017). High-Deductible Health Plans Reduce Health Care Cost And Utilization, Including Use Of Needed Preventive Services. Health Affairs, 36(10), 1762–1768. doi: 10.1377/hlthaff.2017.0610
[16] 2019 Colorado Health Access Survey: Progress in Peril. (2019, September 25). Retrieved from https://www.coloradohealthinstitute.org/research/CHAS.
[17] Health Insurance Plan Filings and Approved Plans. (2019, October 10). Retrieved from https://www.colorado.gov/pacific/dora/health-insurance-plan-filings-and-approved-plans.
[18] 2019 Colorado Health Access Survey: Progress in Peril. (2019, September 25). Retrieved from https://www.coloradohealthinstitute.org/research/CHAS.
[19] The Competition Conundrum. (2019, May 14). Retrieved from https://www.coloradohealthinstitute.org/research/competition-conundrum.
[20] Proposal For Affordable Health Coverage Option. (2019, April 22). Retrieved from https://leg.colorado.gov/bills/hb19-1004.
[21] Proposal for Affordable Health Coverage Option. (2019, October 31). Retrieved from https://www.colorado.gov/hcpf/proposal-affordable-health-coverage-option?eType=ActivityDefinitionInstance&eId=5e28e625-6b1b-4bae-a83e-9e7acae2ea78.