Is Colorado Option the right or wrong prescription?

When the Colorado House of Representatives approved state Senate amendments, passed House Bill 23-1224 on April 26 and sent it to Gov. Jared Polis for his signature, it capped a pulse-quickening debate about the “Colorado Option,” a state-designed health insurance option that launched its first open-enrollment period last year — as well as the broader concept of single-payer coverage and “Medicare for All.”

Supporters call the Colorado Option a success. Opponents call it a failure.

Other than in Colorado and the state of Washington, where the nation’s first quasi-public option program made its debut in fall 2020, public-option health care is still mostly theoretical in much of the United States. Washington’s plans are offered by private health insurers, with reimbursements to providers capped at 160% of what Medicare pays. A third state, Nevada, has begun the process of creating a public-option program and will make plans available for purchase in fall 2025 for coverage that begins in 2026. But in each of those three states, hospitals and insurers have won substantial concessions.

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The original law in Colorado, House Bill 21-1232, called on the regulatory Colorado Division of Insurance to devise a coverage plan that health insurers would be required to offer. It mandated that insurers trim individual and small-group premium costs by 5% for this year, compared with 2021 premiums, within the individual and small group market. That number increases to 10% in 2024 and 15% in 2025.

But when insurers were required to tell the state Division of Insurance whether they could meet the 2024 targets, all but one said they couldn’t. UnitedHealthcare and Cigna said they might be able to meet the targets on a few of their plans but expect to miss them on most.

Among other complaints, they said the Colorado Option’s mandates for reductions don’t take into account either the rising price of health care or how much of it people use in a given year. Anthem, in its filing, wrote that the state’s inadequate inflation calculation was the sole reason it hadn’t been able to meet price goals this year, and that it would force the company to lose even more money in 2024 and beyond.

The bill sent to Polis to correct some issues in the 2021 law was co-sponsored by state Rep. Kyle Brown, D-Louisville, who had been deputy commissioner for affordability programs at the Colorado Division of Insurance and was part of the team that developed the Colorado Option. Brown contended that the Colorado Option is increasing competition because 36 new plans were added for 2023, and that in most counties it’s the cheaper plan. All Colorado counties except Jackson, across the Continental Divide from northern Larimer County, have multiple companies offering on-exchange plans.

HB 1224 would require the Colorado health benefit exchange, with the consent of the insurance commissioner, to develop a format for displaying the standardized plans on the exchange. It also would give the commissioner 120 days to review the rate filings for standardized plans instead of the current 60 days, require a carrier to notify the commissioner of the steps the carrier will take to meet premium rate requirements if the carrier is unable to offer a standardized plan, change the requirements for public hearings held by the commissioner for carriers who are unable to offer the standardized plan, and specify that decisions of the commissioner are final agency actions subject to judicial review in the court of appeals.

Supporters said the changes would make the Colorado Option easier for consumers to find and purchase – but health insurers and other opponents didn’t like that, contending that the bill was promoting the Colorado Option over other plans.

Jason Hopfer, representing the Colorado Association of Health Plans, said that although the law that created the state’s health-insurance exchange was supposed to foster a competitive marketplace for insurance, HB 1224 directs it “to give preference to one product in the marketplace.” The bill’s language, he said, “assumes DOI and the state knows what consumers value, and what they should value.”

About 35,000 Coloradans enrolled in the Colorado Option for the 2023 plan year, including about 25,000 who signed up through the state’s Connect for Health Colorado website – only about 13% of the total number who enrolled through that exchange, which was authorized a decade ago through the federal Affordable Care Act known as Obamacare. The other 10,000 signed up through OmniSalud, a program that provides undocumented Coloradans with a safe way to compare affordable health-insurance plans and enroll on a secure online platform.

Polis said in March that “the Colorado option is driving down premiums, saving people thousands of dollars on health care coverage with more ahead.”

But insurance lobbyists and Republican lawmakers contended that the Colorado Option is a failure – and that HB 1224 simply doubles down on that failure.

Sen. Jim Smallwood, R-Castle Rock, the ranking minority member on the Senate Health and Human Services Committee, wrote in Colorado Politics on April 14 that creation of the Colorado Option “potentially exacerbated the problems it was ostensibly supposed to solve. Now, instead of realizing their misstep and working to correct the problem, some in the state Legislature are intent on making it worse.”

In most counties in the state, he wrote, “traditional, private health plans offer the best rates” for the 2023 plan year – “those that are left, that is. Perhaps the most concerning part of the Colorado Option is the plethora of burdensome regulations created by this one-size-fits-all system, coupled with the attempted undercutting of the private market by the public plan, are taking place at the same time insurance providers are abandoning our state.”

Bright Healthcare exited the Colorado market as of Jan. 1, affecting around 55,000 consumers. Oscar Health announced in May 2022 that it is leaving the individual market, and Humana told local regulators and insurance brokers in October that it would leave the employer group medical business in Colorado, ending all impacted plans by the middle of 2024. It added, however, that the move does not impact its Medicare, dental, vision or life insurance plans.

The law says that if a health-insurance provider fails to achieve the premium-reduction targets, it’s allowed to present evidence and offer an explanation in a hearing with the Division of Insurance, which has its own mandate to keep the premiums competitive with other plans offered by the industry. However, the law also sets fines for hospitals that refuse to accept the Colorado option plan. They start at $10,000 per day and increase to $40,000 per day after 30 days. State regulators could even suspend the hospital’s license or slap conditions on it.

“Like any market, Colorado’s health care market needs a competitive environment to help keep prices down for consumers,” Smallwood wrote. “Far from spurring competitive pressure on the health insurance marketplace, the Colorado Option very well may have been one of the contributing factors that pushed many of the few existing carriers out of the market in the past several months.”

And in a statement sent to BizWest and other media outlets just after HB 1224 was sent to the governor, a group called Colorado’s Health Care Future, an offshoot of the national lobbying group Partnership for America’s Health Care Future Action, seized on the 13% enrollment figure to state that “nearly nine in 10 Coloradans who shopped for individual coverage in the law’s first year rejected the Colorado Option. Given these straightforward facts, the Legislature could have taken advantage of this legislative session and fixed these problems with the failing Colorado Option law. Instead,” it wrote, lawmakers gave insurance regulators “even greater authority to undermine private coverage options and tip the scales further in favor of Colorado Option plans.”

The 501(c)(4) nonprofit Partnership for America’s Health Care Future has disclosed 44 members including health insurance companies, pharmaceutical companies, for-profit hospitals, the Federation of American Hospitals and the American Hospital Association.

Both Smallwood and Colorado’s Health Care Future cited an analysis by independent actuarial consulting firm NovaRest that was commissioned by the Partnership for America’s Health Future Action. They say it illustrates how the Colorado Option has fallen short on its promise to save Coloradans money on their health care.

Still, said Colorado Insurance Commissioner Michael Conway, consumers can find savings by shopping around. He noted that financial assistance is available through the federal Inflation Reduction Act, meaning more than four out of five people who shop for coverage through the state exchange would be eligible for subsidies this year.

“I encourage everyone to visit Connect for Health Colorado to determine what financial help they could receive,” he said, “and shop for the plans that fit their needs.”

Conway told Colorado Politics that the Colorado Option isn’t just about rates.

“It’s the insurance companies almost competing against themselves,” he said. “That’s what we’re seeing in the rates across the board. That’s why people have the ability to shop and find cheaper plans throughout the state. All of these components are working exactly the way we want them to work. In the future, they’ll work even better.”

Support for the plan was also driven by consumer groups and elected bodies – many of which are in Boulder and Larimer counties – that have passed resolutions in recent years to support the concept of “Medicare for All.”

It started with a resolution passed in January 2020 by the town board in the tiny Boulder County mountain community of Jamestown. The Fort Collins City Council followed suit in March 2022 with unanimous approval of a similar resolution, as did Boulder County commissioners on Jan. 31 of this year and a unanimous Longmont City Council at its regular meeting on April 25, the night before the state House sent HB 1224 to Polis.

Larimer County Health Care Action was among several groups that encouraged the Fort Collins City Council to pass its resolution. The council heard Anders Fremstad, an associate professor of economics at Colorado State University, note that more than 28,000 Larimer County residents don’t have health insurance, resulting in “completely avoidable sickness and death,” and that many of those who do have coverage are on high-deductible plans they can’t afford.

Dr. Cathy Egan, a family physician at Loveland Community Health Center, said that every day on the job she sees patients turn down essential medications, tests and surgeries because they can’t afford them. And council member Susan Gutowsky said “the idea that there’s anybody in the United States who has to suffer or die because they don’t have health care is unacceptable.”

Although another council member, Shirley Peel, voted for the resolution, she did so reluctantly, noting that although she realized affordable health care is “a serious issue, and I agree that this is a problem. … I don’t believe we should trade one inefficient system for another.”

Boulder County commissioners Claire Levy, Ashley Stolzmann and Marta Loachamin listed 14 reasons why they supported “improved Medicare for all” and noted in a proclamation that Boulder County residents shouldn’t have to worry about losing health care when they get married or divorced or care for a loved one. It called on the governor, state legislators and congressional representatives to work toward “state or federal legislation that results in comprehensive, affordable health care for all Boulder County residents and is funded by a not-for-profit, single payer system.”

Longmont’s resolution cited the need for essential workers to have health care and for its residents to be able to afford health and housing, as well as for small businesses in the city to be able to compete in attracting and retaining employees.

“There’s an alarming number of homeowners in Boulder County who are housing burdened, meaning they’re paying more than 30% of their monthly income in housing costs. And there are many who are housing insecure, meaning they’re paying 50% of their monthly income in housing costs,” said Tim Waters, the council member who introduced the resolution. “These folks are one medical emergency, one lost job, one car accident away from potentially being homeless. There is a strong correlation between housing security and access to quality affordable health care.

“Health care is one of the big costs in every community, especially in Boulder County,” he said. “This one is solvable by developing a new model for how we pay for the cost of health care that makes sure providers are made whole and citizens aren’t crushed in the process. It’s the will to get this done.”