District 59 constituents are vocal, regularly letting me know how they think, and what I should do about it. By far, the issue concerning them most, generating the most heat and presenting the most consistent message, is health care. Their plea? Lower the costs.
And they’re right. We on the Western Slope pay some of the highest rates in the country, and in 22 of Colorado’s 64 counties, customers have only one choice of insurance company. That’s nothing to be proud about.
Recently, state legislators rolled out their answer to the problem, a bill creating the Colorado Affordable Health Care Option. It is a public-private partnership designed to drive down health care prices in underserved rural Colorado, establish fair hospital and drug pricing and increase health insurance competition.
To be clear, this is not a government-run health program, and it will not take away any insurance program you already have. This is just a new option for those who want to purchase it.
Bill sponsors Reps. Dylan Roberts and Chris Kennedy and Sen. Kerry Donavon address the three health care cost drivers increasing our rates: hospital reimbursement rates, high insurance premiums with lack of competition in the marketplace and pharmaceutical costs.
With House Bill 20-1349, all areas of the state will have at least one new insurance option, built into the already-existing private insurance market. The state will oversee the program, but will not take on any financial liability.
The option increases competition for the roughly 300,000 people on the individual market. Sponsors estimate hard working Coloradans will save between 7% to 19% per month on their premiums.
This Colorado option will cover essential health benefits, is ACA-compliant, and will be sold both on- and off-exchange. To ensure new competition in the single-option counties, the commissioner of insurance will work with companies best suited to specific counties, engaging in a county-by-county, local-control approach under the oversight of an advisory board.
The board will represent all aspects of the health care industry, with the power to override the Commissioner’s decisions, make changes to the program and provide constant oversight and input.
Some counties, like Summit, have their own alliance, and will not necessarily need a public option plan. The commissioner may consider the alliances as competition, so no further options are needed. La Plata County has been considering forming its own alliance.
To bring down the cost of insurance, this option addresses skyrocketing hospital costs. Hospital prices rose by more than 73% between 2009 and 2018; hospital profits in Colorado rose by 280% since 2009. For customers who have purchased and are covered by the Colorado option, hospital and provider reimbursements will be set by the formula.
Currently, hospitals, on average, cover their costs when they reimburse for care at 143% of what Medicare pays, according to data submitted to the Colorado Hospital Association. This number covers base costs of the hospital; the state option will consider other factors as well to determine the rate for the hospital.
The formula sets a starting rate at about 155 percent of the Medicare rate, higher than the break-even point, then increases the reimbursement according to three factors: Is the hospital independent, considered critical-access or rural? Does the hospital serve a high share of Medicare or Medicaid patients? Does the hospital do well managing the underlying cost of care; are they already charging reasonable rates, factoring in operating costs, prices charged and margins?
Another way to generate further savings involves adjusting insurance companies’ Medical Loss Ratio, the amount of money a company must spend on actual patient care, not operating costs and profits. Currently, the ratio is 80%, meaning that 80 cents of every dollar must be spent on patient care. This bill increases that to 85%; many insurance carriers already operate above that rate.
In addition, any pharmaceutical rebates incurred by the Colorado option providers must be passed through to the larger insurance pool, used to reduce premiums.
This public-private partnership looks into how Colorado can lower health care costs throughout the state, addressing the plea of so many constituents: lower the cost of health care.
If it passes, sponsors anticipate the Department of Insurance will start working with the Board to establish the program in the fall of 2021, with open enrollment later that year. By January 1, 2022, the plan would take effect.
Barbara McLachlan represents State House District 59. Reach her at barbara.mclachlan.house@state.co.us.
