Faith Miller, Colorado Newsline
A storm is brewing at the Colorado Capitol over upcoming legislation that would create a public option for health insurance.
As of March 12, the bill hadn’t been officially introduced, but a preliminary version reviewed by Newsline lays out the framework. Under the draft bill, the state would first ask private insurance carriers to reduce their premium rates on all three levels of a standardized individual plan by 20% in every zip code in the state.
If, by 2025, insurance carriers hadn’t met those reduction targets — or if fewer than two standard plans were offered on the individual market in any zip code — then the Colorado Option would kick in.
State Rep. Dylan Roberts of Avon and Sen. Kerry Donovan of Vail, both Democrats, will sponsor the legislation. Roberts said the draft will likely undergo “significant changes” before it’s introduced sometime this month.
The proposal’s health-care-industry critics say insurance carriers wouldn’t be able to reduce premiums by 20% from 2021 levels, so if the bill passed, the public option would be inevitable. Though the bill hasn’t been introduced, opponents have already poured hundreds of thousands of dollars into fighting it at the Capitol.
On the other hand, supporters of a public option say the proposal will open the door for more people to afford the health care they need.
Adam Fox, deputy director of the nonprofit Colorado Consumer Health Initiative, called opponents’ TV ads part of “the standard scare tactics that we’ve seen from the health care industry on other issues.”
“We know that we’re up against a very profitable, unfortunately, and very well-financed industry,” said Fox, whose organization has been one of the main players involved in crafting the legislation.
Voluntary rate reductions would precede public option
The draft proposal, in giving insurers until 2025 to reduce premium rates by 20%, would take a phased approach: First, for the 2023 plan year, insurance carriers would have to reduce the individual market premium rate by 10% as compared with 2021 rates in each county. The following year, private carriers would have to reduce individual-market rates in each county by at least 20% as compared with 2021 rates.
Another requirement: In each zip code, at least two carriers would have to offer a standardized individual insurance plan. That obligation applies to both the 2024 and 2025 plan years.
If carriers do not meet those goals by 2025, then the Colorado Option plans would be offered on the individual market and small group market. They’d be managed by a nonprofit set up by the government, known as a quasi-governmental entity. That proposed framework differs from 2020 legislation that had called for the public option to be carried by private insurers. Last year’s bill was shelved due to COVID-19 constraints.
“Because of COVID and because of some of the stakeholder conversations we’ve had in the last year, we are doing this two-phase approach,” Roberts said in an interview.
In 2025, the state would be required in phase two to set health care provider reimbursement fees for the Colorado Option at a level that would achieve a 20% reduction in premium rates as compared with 2021. Health care providers would have to provide care to people covered by the Colorado Option, and would have to comply with the fee schedule — providers could not charge some people more than others for the same services, depending on whether they were considered “in network.”
After 2025, premium rates could not increase more than the consumer price index plus 1%. The consumer price index for the Denver-Aurora-Lakewood area rose 0.4% from January 2020 to January 2021. It rose 3.8% from 2019 to 2020.
“Colorado has some of the highest health insurance costs in the country and some of the least competition, and so we need to do something,” Roberts said. “We’ve listened a lot to stakeholders on all sides of this issue and think this is a really reasonable step forward for our state that will help those who can’t afford insurance right now, but it won’t impact anybody who is happy with their insurance and it won’t raise taxes.”
‘Financially unattainable’ targets
The public option’s most well-funded enemy — a nonprofit advocacy organization called Colorado’s Health Care Future — just launched a TV advertising campaign raising awareness of what it calls the “higher costs and negative consequences” associated with a public option.
“Despite the bill sponsors’ claims developing a ‘new’ state government option bill, a draft bill … only offers more of the same from last year’s failed public option bill,” the organization’s spokesperson, Tyler Mounsey, said in a recent statement. “It is disappointing that lawmakers are willing to check-the-box instead of providing answers to important questions about the impacts of the bill and respond to concerns raised by vested stakeholders.”
Colorado’s Health Care Future is a project of Partnership for America’s Health Care Future, a national group with members including the Colorado Business Roundtable, Colorado Farm Bureau, Pharmaceutical Research and Manufacturers of America, and private health insurance carriers. The group has spent millions of dollars lobbying against “Medicare for All” legislation at the national level and against public option proposals.
The targeted premium rate cuts — as described in the draft legislation first reported by Colorado Politics — are “financially unattainable” for insurance carriers, Mounsey said in an interview.
The second phase of the public option plan would have poor outcomes for people of color, Mounsey said, citing a recent report by FTI Consulting, a global business consulting firm hired by Colorado’s Health Care Future. The report found lower reimbursement rates under the Colorado Option could put hospitals at risk of closing, which, its authors argued, would disproportionately impact Black and Indigenous communities and people of color.
“What we have to be concerned about is making sure that we’re not doing something that causes a drastic change to care, the cost of care and the impact on communities,” Mounsey said. “At any level cut, that’s something that we’re going to be concerned about.”
The Colorado Hospital Association, which is not affiliated with Colorado’s Health Care Future, likewise feels that the premium reduction targets included in the bill draft aren’t possible to reach by 2025.
“Overall, we’re supportive of a concept of a market-based solution that can help improve affordability,” said Katherine Mulready, the association’s senior vice president and chief strategy officer. “The trick is … that market-based solution needs to be set up for success and not failure.”
The proposed requirement in phase two that all providers would be required to see patients insured by the Colorado Option, coupled with the mandatory fee schedule for providers, is concerning, Mulready said. The possible outcome: “Coloradans with public insurance programs, like Medicare and Medicaid, they might just get crowded out of access to care, and that’s certainly something we’d like to avoid.”
Mulready said the Colorado Hospital Association is in conversations with Roberts about potential changes and has not taken a formal position on the bill, since it hasn’t been introduced in the Legislature.
Another choice for consumers
Roberts said he isn’t intimidated by “right-wing or industry-based attacks” coming from nationally funded organizations, such as Partnership for America’s Health Care Future — which he argued was “fighting the general idea of a public option but not really basing it in anything specific to Colorado’s legislation.”
“It’s an option for people on the marketplace,” Roberts said of the Colorado Option that could be offered in 2025, if carriers failed to meet premium reduction targets. “Nobody’s forced onto this plan. It’s simply just a choice that you’ll have if you shop on the individual or small-group market.”
Colorado residents can currently purchase individual and small-group coverage plans from private insurance carriers through Connect for Health Colorado, the state’s health insurance marketplace. Approximately 7% of Coloradans had an individual health insurance plan purchased through Connect for Health in 2019, while slightly more than half of Coloradans had insurance provided by their employer.
People who get health insurance through a medium or large employer would not be directly affected by the public option legislation. They would keep their private insurance, as would individuals and small employers that did not want to sign up for a Colorado Option plan.
Some people now only have one individual market plan to choose from, Fox said — hence the draft bill’s requirement for at least two carriers per zip code.
“There are some cases now where there are plans that may be offered in a zip code that is part of a county or it crosses a county line, and so that carrier is technically offering a plan in both counties, but they may only be offering it to 10% of the people living in that county,” he explained. “So unfortunately, the zip code is sort of the fundamental level that we sort of have to start evaluating whether there are actually options available to each and every Coloradan.”
Colorado’s new reinsurance program, created through 2019 legislation, helped drive decreases in average individual plan premium rates over the last two years. In 2021, it resulted in an average premium savings of 20% for individual-plan health care consumers. Premium rates decreased an average of 1.4% from 2020 to 2021.
However, premiums didn’t decrease in every area of the state, and are still too high for many people to afford even if they earn too much to qualify for Medicaid.
According to a 2019 survey by the Colorado Health Institute, approximately 6.5% of Coloradans, or one in 15 people, do not have any health insurance. But policymakers fear that number has increased as people who lost jobs during the pandemic also lost their employer-provided health insurance. For those who still have private insurance, affordability problems persist.
“We know that there are still too many Coloradans struggling to afford their health coverage, and if we don’t start addressing that, the problem is just going to linger,” Fox said.
The goal of having at least two carriers in each zip code in the first two years of the legislation — or adding the public option in the second phase — would cut down on what Fox calls “monopolistic tendencies” of insurers or providers in certain areas of the state where premiums are highest, he said.
“Generally, the higher costs correlate with those areas that have fewer options, and that is both fewer options with insurance carriers but also fewer options as to hospitals or providers that may be available,” Fox said.
But Mulready, of the Colorado Hospital Association, argued that health care providers should get some credit for reversing growth in individual premium rates after a 34% jump from 2017 to 2018.
“In saying we should subtract 20% from 2021 premiums (under the public option legislation), we’re essentially penalizing early adopters of affordability strategies that have kept our premiums flat or decreasing over the last three years,” she said. “Starting in 2019, we really saw individual market premiums truly flatten out.”
While much of the reduction in rates was driven by the Polis administration and Legislature, some private market strategies have helped, too, Mulready said.
And in the current bill draft, she pointed out, there are no specifics on how much hospitals would be paid under the Colorado Option fee schedule in order to achieve the 20% premium reduction in phase two.
Roberts said he’s optimistic the bill sponsors can get some buy-in with health care industry stakeholders as the draft undergoes changes.
“I think we all have the same goal, which is getting more people covered with health insurance and saving people money,” he said. “How we get there is the debate right now.”