POINT: Dylan Roberts, Inman Jodeh
The Colorado Health Insurance Option Is Designed to Reduce Insurance Premiums for Everyday Coloradans
The status quo in health care is not working. One in five Coloradans forgo coverage and care because they cannot afford the cost. Rising premiums and skyrocketing out-of-pocket expenses have turned health care into a privilege for the wealthy, while working Coloradans, Black, Brown, Indigenous, people of Color (BIPOC), and small businesses suffer. It is unacceptable that Coloradans face little or no choices on the market and only increasing prices just because of where they live. The Colorado Option is a two-phased approach that seeks to lower costs and give Coloradans more and better health insurance options that ensure quality of care increases.
Phase one provides an opportunity for the health care industry, including hospitals, insurance carriers, providers, and drug manufacturers, to work together and lower premium rates on their own. The industry has told us they can lower costs without government intervention and mandates, and we’re taking them at their word. The bill asks the industry to lower health insurance premiums by 10% each year for the next two years. For a $500 per month insurance premium, someone would save $1,140 per year.
If the industry cannot or will not lower costs for people and small businesses by 2025, then phase two would kick in. A health insurance plan known as the Colorado Option would be created and offered in the individual and small employer markets by a nonprofit entity. Nobody would be forced to buy it and since it is paid for by already-appropriated federal dollars and the premiums paid by customers; it does not raise anyone’s taxes.
The Colorado Option would provide affordable, quality care with lower out-of-pocket costs and give many uninsured Coloradans access to the security of quality health insurance that actually provides comprehensive coverage.
Small businesses across Colorado support the Colorado Option because they know firsthand how broken our health care system is. Each year small businesses brace for what has become inevitable — higher premiums with less benefits.
Oftentimes, the plans that small businesses are fighting to provide are not usable for their employees because the deductibles are too high for working families. Many small businesses cannot even afford to cover their employees, putting them at a competitive disadvantage when recruiting and retaining talent.
The Colorado Option aims to reduce insurance premiums in the small employer market by 20% in phase one, and would provide affordable coverage if phase two is reached. Under either scenario, small businesses and their employees would benefit.
The Colorado Option isn’t just an idea pulled from a hat — it’s the product of years of conversations and negotiation with parties on all sides of the issue. In fact, Colorado has already proven that the cost savings targets outlined in phase one are possible to achieve.
Through innovative collaboration, The PEAK Health Alliance lowered insurance premiums for their seven-county community. They put people over profits and were able to lower premiums by more than 38% in a year. This bill asks the industry to realize just 1/4 of the savings achieved through the alliance.
Communities of color have been haunted by decades of systemic racism in the health care industry. The Colorado Option seeks to chip away at these alarming disparities by prioritizing communities of color in two ways:
First, the bill lowers costs and creates a standardized plan which will prevent carriers from charging excessive out-of-pocket costs. Second, the plan will be required to include benefits that improve racial health equity and decrease health disparities, including pre- and post-birth outcomes, and expanded predeductible coverage for certain key services.
Every Coloradan deserves access to quality and affordable health insurance. Too many people are hurting right now for us to not do anything. Our bill is a collaborative and bold step for affordable, quality, and accessible health care.
COUNTERPOINT: Matt Soper
In 2016, 78% of Colorado voters overwhelmingly rejected a ballot measure to create a state-wide universal healthcare system. Now, in 2021, Democrats in the Colorado legislature are proposing a bill to create a public option for healthcare, HB21-1232, the foundation for building a single-payer system.
Only one state, Washington, has implemented such an attempt to reduce health insurance premiums. However, since 2018, Washington’s premiums have skyrocketed more than 15%, while Colorado’s have fallen over 25%. Affordable premiums available on the ACA marketplace are 9.5% lower in Colorado than Washington.
Further, an analysis of Washington Health Benefit Exchange’s data found public option plans cost up to 29% more than traditional private plans in some parts of the state.
HB21-1232, the Colorado Public Option, has two phases. The first phase gives the government time to set up the public option and lays out impossible goals for insurance carriers. By 2023, a carrier must offer a standardized insurance premium on the individual and small-group markets that is 10% less than the premium rate of an equivalent plan in 2021. By 2024, carriers are strongly encouraged to reduce premiums by 20%, and by 2025 annual premium rate increases for plans may only increase by the consumer price index, plus 1%, over the previous year.
It is a chimera to say premiums can be knocked down by 20% in less than three years. If the insurance companies, hospitals, and pharmaceuticals cannot achieve this impossible goal, then the bill moves to the second phase.
The second phase of the public option legislation says that if the private sector cannot reduce premiums by 20% in three years, then a quasi-governmental “nonprofit” called the Colorado Option Authority comes into force, offering its own insurance: the Colorado Health Insurance Option. This state health insurance would be 20% cheaper than the average premium in all 64 counties.
If the premiums are 20% cheaper with the government, why would anyone stay with the private sector? Price setting is the proponent’s answer! Under the bill, the State Insurance Commissioner will achieve the 20% cost savings (compared to private plans at the time of implementation) by determining what prices the Colorado Health Insurance Option will pay for medical services. This structure is exactly like Medicaid.
Rural hospitals often have a payer mix that is 75%+ Medicaid and Medicare. Unlike urban hospitals, rural hospitals do not have an economic size to negotiate with big government or big insurance companies, which means their reimbursement rates for services will be the lowest in the carrier’s network.
To break even, rural hospitals will charge commercial payers more because government payers, like Medicaid and Medicare, don’t pay the actual cost of delivering the medical service. Considering that the only place for a hospital to achieve financial equilibrium on the balance sheet is in the commercial payer mix, if half of this bucket joins the new public option, a hospital with a narrow margin, such as most rural hospitals, will be in jeopardy of having to shutter their doors.
The bill also seems to subtly encourage hospitals and clinics to not accept other below-cost payers like Medicaid and Medicare, risking a further shortage in medical services to the critically unserved population.
In turn, it also causes an increase in premiums for the employer category of group plans.
HB21-1232, the Colorado Public Option, will result in permanent closure of some rural hospitals, and cause others to shift the costs to commercial insurers, which means patients end up paying more or having a reduction in the quality of care. Welcome to socialized medicine!
Dylan Roberts (D) represents House District 26 covering Eagle and Routt counties and Iman Jodeh (D) represents district 41 in Arapahoe County in the Colorado House of Representatives. Matt Soper (R-Delta), represents House District 54 in the Colorado House of Representatives and serves on the Delta County Memorial Hospital Board and the House Health and Insurance Committee.