Colorado on verge of becoming 2nd state with its own (sort of) Public Option

Colorado

I haven't really been following the saga of Colorado's H.B. 1232 "Standardized Health Benefit Plan Colorado Option" bill as much as I should have been over the past year. The last time I wrote anything substantive about it was over a year ago...in fact, it was just a few weeks before the COVID hit the fan:

  • The issuers will offer the plans on and off the Exchange in the individual market.
  • The issuers will offer qualified health plans (QHPs) at Bronze, Silver, and Gold metal tiers.
  • The premiums of the plans will reflect facility reimbursement levels that vary by facility. The formula for determining facility-specific reimbursement levels was provided by DOI, utilizing hospital specific financial information provided by HCPF. Maximum reimbursement levels by facility are set between 155% and 218% of Medicare payment rates.
  • The plans will be offered beginning in calendar year 2022.
  • The state intends to apply for a 1332 waiver and use Federal pass-through savings for additional benefits or expanded coverage. The Baseline scenario presented below reflects the current federal and state regulatory market, including a state-based reinsurance program. The second scenario reflects the results of offering a Colorado Health Insurance Option with additional benefits, a premium wrap and a cost-sharing wrap.

One of the more interesting elements of the proposal at the time was that it was supposed to use the theoretical savings from the lowered premiums (and thus, lower federal APTC subsidies) to go towards beefing up subsidies to the enrollees themselves. This is similar to how a reinsurance waiver works in some ways, except that instead of the money going to lower unsubsidized premiums across all plans (which would mostly only help those earning more than 400% FPL, and which Colorado already has now), it would go to enhance subsidies and/or coverage for the subsidized population.

In addition, unlike Washington State's "Cascade Care" program (which are designed and regulated by the state, but still administered privately something like managed Medicaid is), Colorado's was supposed to be a true Public Option: Designed, regulated and administered by the state itself.

Unfortunately, most of that wasn't meant to be in the end:

Colorado Democrats this week will offer a sweeping amendment that seeks to dramatically rewrite their bill to decrease health care costs after weeks of negotiations with hospitals, pharmaceutical companies and private insurers that stalled the legislation’s progress at the Capitol.

If the amendment passes, some of the most powerful health care industry groups that have opposed the measure, House Bill 1232, will take a neutral stance on the legislation. Proponents say it will still drive down costs, just through a different mechanism.

Among the major proposed changes to the measure is a move away from a state-run, public health insurance option in favor of requiring private insurers to offer a highly regulated, standardized plan. Lawmakers pursued a similar policy last year, but it was scrapped in part because of the coronavirus pandemic.

Instead of requiring 20% premium reductions over two years, the amendment released Monday calls for an 18% reduction over three years.

The original version of the bill, as introduced, would have required health care providers to accept the public option plan or potentially lose their license.

Under the proposed amendment, providers won’t be required to accept the standardized private plans as long as “network adequacy” is met — meaning a provider network must be culturally responsive and reflect the diversity of consumers to the “greatest extent possible.”

...and so on.

Here's how the bill description reads today:

The bill requires the commissioner of insurance (commissioner) in the department of regulatory agencies to establish a standardized health benefit plan (standardized plan) by rule to be offered by health insurance carriers (carriers) in the individual and small group markets. The standardized plan must:

  • Offer health-care coverage at the bronze, silver, and gold levels;
  • Be offered through the Colorado health benefit exchange;
  • Be a standardized benefit design created through a stakeholder engagement process;
  • Provide first-dollar, predictable coverage for certain high value services; and
  • Comply with state and federal law.

Beginning January 1, 2023, and each year thereafter, the bill encourages carriers that offer:

  • An individual health benefit plan in Colorado to offer the standardized plan in the individual market; and
  • A small group health benefit plan in Colorado to offer the standardized plan in the small group market.

For 2023, each carrier shall set a goal of offering a standardized plan premium that is at least 10% less than the premium rate for health benefit plans offered by that carrier in the 2021 calendar year in the individual and small group market. For 2024, each carrier shall set a goal of offering a standardized plan premium that is at least 20% less than the premium rate for health benefit plans offered by that carrier in the 2021 calendar year in the individual and small group market. For 2025 and each year thereafter, carriers are encouraged to limit annual premium rate increases for the standardized plan to no more than the consumer price index plus one percent, relative to the previous year.

The Colorado option authority (authority) is created for the purpose of operating as a carrier to offer the standardized plan as the Colorado option if the carriers do not meet the established premium rate goals. The authority shall operate as a nonprofit, unincorporated public entity. The authority is required to implement a provider fee schedule as established by the commissioner in consultation with the executive director of the department of health care policy and financing. Health-care providers and health facilities are required to accept consumers who are enrolled in any health benefit plan offered by the authority.

The idea was that the private carriers have two years to find a way of cutting the unsubsidized premiums down by ~18% while still meeting all ACA regulations and network requirements, and if they can't, the state would then come in and make it into a true Public Option.

The bill creates an advisory committee to make recommendations to the authority concerning the development, implementation, and operation of the authority.

The commissioner is required to apply to the secretary of the United States department of health and human services for a waiver and include a request for a pass-through of federal funding to capture savings as a result of the implementation of the standardized plan. The commissioner is required to disapprove of a rate filing submitted by a carrier if the rate filing reflects a cost shift between the standardized plan and the health benefit plan for which rate approval is being sought.

The bill makes the failure to accept consumers who are covered through the Colorado option or the balance billing of a patient in violation of this bill grounds for discipline under specified practice acts.

The bill repeals the authority and its functions if the United States congress establishes a national public option program that meets or exceeds the premium rate goals set forth in and health-care coverage pursuant to this bill.

Put another way, if a robust national Public Option is ever actually implemented, the Colorado version would be sunsetted.

To be honest, there have been so many changes in the bill over the past few weeks/months, I'm not sure I know exactly which provisions made the final cut of the version which passed through the state House a few days ago:

The bill started out with the possibility that Colorado would offer a public option — an insurance plan run by the government that competes with private plans. But sponsors dropped that idea during a major rewrite last month in large part to assuage industry opposition.

The proposal now calls for insurance companies to negotiate with hospitals and doctors to reduce premium prices for one specific, heavily-regulated insurance plan by 18% over three years. If they don’t, the state can step in and dictate how much hospitals and doctors can charge.

In other words, if they don't hit the 18% drop target, the plan would still be privately managed but the provider rates would be set by the state. To be honest, to me that actually sounds like it could be more effective depending on the details, since it's provider rates which make up a much bigger chunk of healthcare costs than whether the payment delivery system is publicly or privately run.

But, because this plan has yet to be created, it’s unclear how appealing it will be to consumers. Will insurers have an attractive network of hospitals and doctors? Will it have enough benefits to outweigh paying more for a possibly more robust plan?

This is exactly the problem which Washington State ran into last year with their newly-introduced "Cascade Care" plan. The easiest way to keep premiums down is to have a narrow network of providers...but the narrower the network, the fewer people will be interested in enrolling in the plan.

As for the price issue:

...the starting point for the 18% reduction isn’t the lowest-price plan in a county. It’s the average of all the plans offered within the county this year. And it’s also adjusted for medical inflation and to exclude the savings from the reinsurance program. In other words, it’s a complicated number that hasn’t yet been released.

In addition to that, House Bill 1232 lays out a lengthy process of hearings and appeals when insurance companies can’t hit the 18% reduction target for the standardized plan in a specific county. These hearings would allow the commissioner of insurance to set the prices that hospitals and doctors can charge for people covered by the plan in that county. But the end result could be a price that still doesn’t achieve the 18% reduction.

There's also two new, related wildcards this year: The expanded federal subsidies under the American Rescue Plan...and whether or not those extra subsidies are locked in permanently or not (right now they're only in place through the end of 2022). The fact that the enhanced ARP subsidies are retroactive to the beginning of 2021 make crunching the actuarial numbers even messier this year and next, since it'll take awhile for insurance carriers (and state regulators) to figure out how much of an impact they're having on total enrollment, the morbidity of those enrolled, and both costs and revenue (as of May 5th, Connect for Health Colorado reported 17,300 additional enrollees during the COVID Special Enrollment Period, bumping their 2021 enrollment up by nearly 10%).

The bill now moves on to the Colorado Senate, where I presume they'll tinker with it further.

For my part, I strongly support these state-based POs even if they fall somewhat short of their original hopes out of the gate. Washington's Cascade Care got off to a relatively unimpressive start, but they've made some improvements for next year. Colorado seems to have learned a few things from Washington, and hopefully other states like New Mexico will learn from both of them. You have to start somewhere.