Madeleine Schmidt, Colorado Times Recorder
There’s an important health care bill moving through Colorado’s legislature, but if the word “reinsurance” doesn’t exactly grab your attention as you scroll through your news feed, you might have missed it.
But here’s something worth noticing: it could save some Coloradans hundreds of dollars a month on health care, a huge deal given the state’s high premiums, especially in rural communities.
House Bill 1168 seeks to implement a state-run fund to help insurance companies cover their sickest patients — the ones that end up being the most expensive and pulling up the price of premiums for everyone else. It is, in essence, an insurance program for insurance companies.
By stopping the most costly patients from raising insurance rates for everyone, the so-called “reinsurance” program would essentially help stabilize the price-sensitive individual market, where people who don’t get coverage through their employers or qualify for Medicare or Medicaid buy their insurance plans. Around 400,000 Coloradans buy their insurance on the individual market.
According to a study from the Division of Insurance, the program would lead to a statewide decrease in individual premiums of nearly 23 percent. For those living in more rural parts of the state, including the Western Slope and Eastern Plains, where premiums are particularly high, advocates expect the bill could decrease premium prices by closer to 30 percent. For some Coloradans, that could mean several hundred dollars in savings a month.
“You see a much larger reduction in premiums for the highest cost areas, and those are the areas that are going to most benefit from reinsurance,” said Adam Fox of the Colorado Consumer Health Initiative in an interview with the Colorado Times Recorder. “So for an individual living in Garfield County who is approximately age 40, they’d be paying approximately $580 a month for the lowest level plan that they could find. Under reinsurance, if there’s a 30 percent drop in premiums, that would go to just over $400 a month, so they’d save close to $200 a month in premiums.”
The program would also hugely benefit families in rural areas that are paying high health care premiums.
According to Fox, a typical family of four in Garfield County is paying at least $1,800 a month for health insurance on the individual market. Under reinsurance, he expects such a family to see about $500 in savings per month. Garfield County families paying higher premiums for better plans, which can cost around $2,500, could save over $700 a month if the bill passes.
In Denver, where premiums are cheapest, Fox says premium prices would decrease by closer to 15 to 20 percent, but still, the savings for urban Coloradans would be significant. Denver families, he said, could save up to $300 a month.
Fox cautioned that these numbers are estimates, and that savings could also vary from plan to plan.
“Hypothetically everybody would see some reduction in their premiums because of reinsurance, but if they happen to have a health insurance plan that has a comparatively healthy risk pool historically, the insurers may not be able to bump down premiums as much because the reinsurance program may not come into play as much,” he said.
Colorado sees some of the highest health care costs in the country, with one study showing that Coloradans are paying 17 percent more than the U.S. average.
In 2018, the cost of premiums on the state’s individual marketplace rose by a whopping 34 percent on average. Many analysts blame Republican initiatives to sabotage the Affordable Care Act and block legislation aimed at reducing costs.
The reinsurance program will be financed in part by health care providers, which will contribute in varying degrees depending on geographical location, hospital size, and Medicaid and Medicare payer mix, among other factors.
The program also taps into federal funds made available for innovation through the Affordable Care Act, an avenue which seven other states have already pursued to create reinsurance programs of their own that have been successful in lowering costs for consumers.
For example, Minnesota saw an 11 percent decline in prices after implementing such a program, while premiums in Alaska dropped by 26 percent.
A bill creating a reinsurance program was proposed during the 2018 legislative session in Colorado, but failed in the Republican-controlled state Senate.
Now, with a Democratic majority in both chambers of the legislature, and a governor who’s been adamant about creating such a program, the bill appears to be on its way to becoming law.
Opponents of the bill have concerns about how the program would be paid for and worry that it could place too large a burden on hospitals and health care providers.
“I appreciate the idea of reinsurance, and I think it is something that we sorely need, the issue is the way this reinsurance is structured,” Rep. Colin Larson (R-Littleton), who voted against the bill Monday, told the Grand Junction Sentinel. “There have been seven other states that have done reinsurance across the country, none of them have done it solely on the backs of providers, which is what we are proposing to do in this bill.”
Fox, on the other hand, says he doesn’t think paying into the program will pose a financial threat to providers.
“There’s been quite a bit of evidence lately that shows that Colorado hospitals have an inflated administrative cost that they’re passing on to consumers, and that many of our Colorado hospitals have a much higher profit margin than is the norm,” he said.
Fox added that the bill takes into account that some hospitals, particularly in rural parts of the state, don’t have as much to contribute to the program.
“There is some language that guides the commissioner of insurance to essentially create rules for some rural hospitals and critical access hospitals to be exempt from contributing into the reinsurance programs, because some of those rural hospitals and critical access hospitals simply don’t have the same kind of profit margins or leeway that some of the big hospitals along the Front Range have,” he said.
Regardless of concerns from some Colorado Republicans, the bill has strong bipartisan support, particularly from Republicans in rural areas where a reinsurance program would have the greatest positive impact.
With sponsorship from state Reps. Julie McCluskie (D-Dillon) and Janice Rich (R-Grand Junction) and state Sens. Kerry Donovan (D-Vail) and Bob Rankin (R-Carbondale), the bill passed on a vote of 47-15 in the House last Monday.
Fox called it a “vital step to helping the nearly 70 percent of Coloradans that are worried about affording their health coverage.”
“This legislation, if approved by our Senators, can bring peace of mind to the Coloradans purchasing their own insurance and those that may need to in the future,” he said.
“This will have a meaningful reduction in health insurance rates on the individual market across the state,” said McCluskie in a press release following the bill’s approval in the House. “We don’t have any more time to waste. People are deciding between paying their mortgage and their health insurance right now.”
The bill will now be considered in the Senate, where Democrats hold a tighter majority. A hearing is scheduled for Thursday in the Senate Health and Human Services Committee.
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