Premium-Cutting CO Public Option Plan Sparks Payer Concerns

October 10, 2019 - Colorado officials said that the state’s public option plan would save Coloradans 9 to 18 percent or more on monthly premiums, but payers and providers have concerns.

The state released a draft to the public on October 7.

“We have to build a more rational health care system,” said Colorado Insurance Commissioner Michael Conway. “Consumers and employers in our commercial markets should not be paying nearly three times as much as Medicare like they are today. All of us - the state agencies, the insurers, the hospitals and the many more stakeholders - have to come together to make the State Option work for Colorado.”

The plan aims to bring members increased savings and lower administration costs while posing no financial risk to taxpayers or the state. 

Aside from premium decreases, a federal waiver worth $69 to $133 million in consumers’ savings may also mitigate out-of-pocket costs.

READ MORE: Verma Supports Medicare Advantage, Decries Public Option

Under the new plan, a public option would be offered to the 200,000 Coloradans who cover their own insurance as an alternative to the individual health insurance marketplace. Consumers would not be required to enroll on the state coverage option, but rather have that coverage option as a choice. After a set period of time, the plan would become available to all Colorado residents.

Colorado offered a detailed outline for the plan’s financing. The state will lower hospital reimbursements from 289 percent of Medicare reimbursements, setting threshold amounts between 175 and 225 percent of Medicare.

Large private healthcare payers would cover any leftover costs not recuperated by the reduced hospital reimbursement rates. Payers will be required to spend 85 percent of their premium income on members’ care.

Additional sources of funding include the federal government and drug manufacturers. The plan may receive premium tax credits through a section 1332 waiver which Colorado submitted to the federal government. Prescription drug rebates might also apply to individual policies, lowering their price.

Licensed insurance agents, however, will receive a commission for selling the public option plans.

READ MORE: Single Payer, Public Options Become Focus of Healthcare Debate

Colorado Department of Health Care Policy and Financing (HCPF) as well as the Division of Insurance (DOI) would regulate private payers who offer the plans and bear the risk.

Payers and hospitals voiced discontent with the suggested format. For most payers in Colorado and for all hospitals, the public option would not be an option but rather a requirement.

Depending on the payer’s size, payers may have no choice but to offer it for qualifying members and shoulder the risk.

The Colorado Association of Health Plans, the state’s major payer organization, has not yet made an official statement.

"We are reviewing these recommendations with our members that include plans that operate across the state and in specific geographic areas and look forward to ensuring that this proposal builds on the strength of, and does not jeopardize, Colorado’s employer sponsored health insurance marketplace," the organization told HealthPayerIntelligence.com. 

READ MORE: CO Challenges, Settles UnitedHealth, DaVita Vertical Merger

However, the organization has indicated their concern to online news outlet 9news.com and the organization's website features an article from September 2019 that says the public option plan could cost the state healthcare jobs.

For hospitals, although the state promised its plan aimed to protect rural hospitals, organizations such as the Colorado Hospital Association have been clear about their disapproval regarding the rate setting and mandatory participation.

The Administration has also opposed public option’s reimbursement approach. In a speech to the Better Medicare Alliance in July 2019, CMS Administrator Seema Verma decried public option’s empowerment of the federal government to strong-arm providers.

“As head of the nation’s largest insurer—Medicare, Medicaid, and the Obamacare exchanges—I see the day to day challenges of government-run programs, and am deeply concerned about the proposals we have seen to upend healthcare in America, particularly Medicare for All and the public option,” Verma said at the time.

If the bill goes into effect, the HCPF and DOI would set up an advisory board of stakeholders to confront payers’ and providers’ future concerns.

“The stakeholder process was instrumental in crafting the draft solution. I am proud of the thoughtful contributions made by Coloradans, hospitals, doctors, and employers across the state,” said Department of Health Care Policy & Financing executive director Kim Bimestefer. “I am confident we’ve met the requirements of HB19-1004. Now it is time for Coloradans to speak out again to share their thoughts to further influence the final proposal and next steps.”

With election season around the corner, public option is among the array of potential health reform plans the country may choose from and is at the center of the healthcare debate. Thus, many view Colorado as a microcosm for the nation if public option takes effect there.

“The eyes of the country really are on us,” Conway said at a press conference.

While Colorado may be preparing to set a precedent with its public option plan, it is not the first state to make an attempt. Earlier this year, Connecticut also made a pass at public option. Cigna’s threat to remove its headquarters from the state if the bill succeeded, however, brought negotiations to a halt.

The comment period for Colorado’s statewide public option legislation draft ends October 25 and the bill will go to the state legislature on November 15. If passed, the plan would not go into effect until 2022.