Rates for people buying their own health insurance could drop dramatically in 2020 — but only if the federal government green-lights a new program aimed at cutting those costs.
Insurance rates on the state’s individual market could decrease for the first time in years, by an average of 18.2% next year. That’s a far cry from the drumbeat of steep rate hikes that came to be expected as Capitol Hill wrestled over the Affordable Care Act.
But before those savings can kick in, the federal government must allow Colorado to proceed with a bipartisan “reinsurance” program passed by state lawmakers this year, reports the state Division of Insurance, which announced the proposed rates.
The program has been touted as insurance for insurance companies. By using state and federal funds to pay for the most costly bills submitted to insurers each year, those companies theoretically can pass along those savings to consumers in the form of lower monthly rates.
“That will save families thousands of dollars that they can put back into our economy, invest in their kids, invest in their home, or do whatever they like to enjoy the Colorado we love,” Polis said.
State Insurance Commissioner Michael Conway said he was “pretty confident” the state’s request would be approved by the Centers for Medicare and Medicaid Services, after “very encouraging” conversations with the agency’s leaders.
If the program isn’t approved, insurance rates could stay steady across much of the state.
Average premiums — the monthly cost of insurance plans — are expected to increase 0.5% across Colorado next year without the program, state regulators said Tuesday.
The same will largely be true in the Colorado Springs area. Rates here are expected to drop 15% with the reinsurance program or increase 0.8% without it.
It all marks a significant shift from years of rate increases on the individual market, which insures people who do not have employer- or government-based coverage. In Colorado, that amounts to 8% to 9% of the state’s population.
Average insurance rates in 2019 rose a modest 5.6% across Colorado after a roughly 30% increase in 2018 and about a 20% increase the year before.
The greatest savings could take place in Pueblo and across much of the Western Slope and other rural areas, division officials said.
For years, rural communities, particularly mountain towns, have faced some of the highest insurance rates in the nation.
But next year, rates could drop 26% to 30% in those areas if the new program is approved. If not, rates still could drop a few percentage points in most of those areas.
“It looks as though reinsurance is going to work as advertised,” said Joe Hanel, spokesman for the Colorado Health Institute. “We always thought the program design made sense and had been proven in other states. And it sure looks like that’s what’s happening here, too — as long as the waiver is approved.”
At least seven other states have won federal approval for reinsurance programs.
Colorado lawmakers initially proposed a far different program than had been adopted elsewhere. That early version relied heavily on hospitals for the money to pay insurers’ biggest claims.
But they scrapped that proposal amid concern that federal officials would not approve it. The lawmakers instead hewed much closer to programs adopted in other states, relying on a complicated formula using $170 million in federal money, plus $90 million in state and hospital funding.
The rates announced Tuesday were preliminary and represented insurers’ requests for 2020.
State regulators now must review insurers’ proposals over the next couple of months to ensure they meet state and federal laws. They’ll ask insurers to justify premiums and benefits, and residents can submit comments to the Division of Insurance on those rate requests.
Rocky Mountain HMO and Denver Health Medical Plan proposed the greatest year-over-year rate cuts, with prices expected to drop 29% to 34%.
The smallest proposed decreases still stretched into double digits. A batch of Anthem plans and policies by Kaiser would drop 10% and 13%, respectively.
The biggest winners from Tuesday’s announcement likely will be people who do not receive federal tax credits to lower their monthly insurance bill, Hanel said. They are people who earn four times the federal poverty level, which is $103,000 for a family of four, and who have been hit hardest by previous rate increases.
Still, some observers said years of increases have left coverage out of reach for many — meaning more work is needed, even if reinsurance is approved.
“Does this get us really where we need to be, where premiums are affordable for everyone? No, probably not all the way there,” said Adam Fox, of the Colorado Consumer Health Initiative. “But it certainly helps get us closer to that and unwinds some of the premium increases that we saw over the last couple of years.
“Realistically, if we want to bring premiums down in a much more sustained fashion, we’re going to really have to start grappling with some of the underlying costs.”