A group of Colorado Democrats officially introduced legislation that would potentially create the Colorado Option: a lower-cost, nonprofit-managed health insurance plan sold on the individual and small group markets that all providers would be required to accept.
Under the legislation, the Colorado Option would only become available — starting in 2025 — if private insurance carriers failed to reduce premiums by 20% over two years for standard individual and small group plans sold on the state’s exchange.
The public option would be carried by a quasi-governmental nonprofit entity called the Colorado Option Authority, set up by the state and managed by a board of directors. Individual and small group plans carried by the authority would have to achieve a 20% cut in premiums as compared with 2021 rates, and all health care providers in the state would be required to accept the plans.
The officially introduced public option bill — sponsored by Reps. Dylan Roberts of Avon and Iman Jodeh of Aurora, along with Sen. Kerry Donovan of Vail — differs from a previous draft that would have only set voluntary reduction targets for individual plans, but not small group plans, which cover small businesses.
Phase one of the bill would task insurers with reducing premium costs and adding plan options.
For the 2023 plan year, insurance carriers would have to reduce individual and small group premium rates by 10% as compared with 2021 rates in each county. The following year, private carriers would have to reduce individual and small group premium rates in each county by at least 20% as compared with 2021 rates.
Another requirement: In each zip code, at least two carriers would have to offer a standardized individual insurance plan. That obligation applies to both the 2024 and 2025 plan years.
“The two counties that I represent, Eagle and Routt, there’s only one option on the health insurance market for those who buy on the individual market, and those premiums are some of the highest not only in our state but in our country,” Roberts said during a virtual news conference March 18 to introduce the legislation.
If carriers did not meet the bill’s phase-one goals by 2025, then phase two would kick in, and the public option plans would be offered on the individual and small group market offering 20% cheaper premium rates.
Health care providers would have to provide care to anyone covered by the Colorado Option and would have to comply with the fee schedule — providers could not charge some people more than others for the same services, depending on whether they were considered “in network.”
After 2025, premium rates could not increase more than the consumer price index plus 1%. The consumer price index for the Denver-Aurora-Lakewood area rose 0.4% from January 2020 to January 2021. It rose 3.8% from 2019 to 2020.
Employer-based insurance not directly affected
The bill would be contingent on the approval of a waiver from the federal Department of Health and Human Services, which would provide funding for the program.
Before it was introduced, health care industry opponents had already spent hundreds of thousands of dollars lobbying against public-option legislation at the Capitol and in TV advertisements.
“This proposal creates more questions than it answers,” Tyler Mounsey, spokesperson for Colorado’s Health Care Future, said in a statement following the bill’s introduction. “Unfortunately, the sponsors and their allies continue to disregard concerns raised by stakeholders and overlook the unaffordable costs and negative consequences of their proposal, which would disrupt Colorado’s integrated health care system during a critical time when patients are relying on our health care community.”
Colorado’s Health Care Future is a project of Partnership for America’s Health Care Future, a national group with members including the Colorado Business Roundtable, Colorado Farm Bureau, Pharmaceutical Research and Manufacturers of America, and private health insurance carriers. The national group has spent millions of dollars lobbying against “Medicare for All” legislation at the national level and against public option proposals.
Colorado residents can currently purchase individual and small-group coverage plans from private insurance carriers through Connect for Health Colorado, the state’s health insurance marketplace. Approximately 7% of Coloradans had an individual health insurance plan purchased through Connect for Health in 2019, while slightly more than half of Coloradans had insurance provided by their employer.
People who get health insurance through a medium or large employer would not be directly affected by the public option legislation. They would keep their private insurance, as would individuals and small employers that did not want to sign up for a Colorado Option plan.
But the legislation would lead to less expensive insurance for smaller companies, the bill sponsors say.
“Our community’s workforce quite literally depends on the health and reliability of our staff,” Ashley Henshaw, owner of a day care and early learning center in Littleton, said during the news conference. “I currently have a staff of approximately 26 individuals who are talented and diverse and deserve to have health care. … We are not a large corporation with endless resources. Health care is expensive.”
6.5% of Coloradans lack health insurance
Some Colorado business interests are less enthusiastic.
In a statement, Kelly Brough, the president and CEO of the Denver Metro Chamber of Commerce, said the business group has concerns about the public option bill.
“Though being pitched as a market solution, the truth is directing carriers to provide a specific government product and dictating the cost of that product ensures we lose all the value associated with creating a competitive marketplace,” Brough said. “The timelines and arbitrary thresholds in the bill are intended to guarantee that the private sector isn’t going to be given the time or the opportunity to meet the goals of the bill, which means a public option is a foregone conclusion.”
Brough said the chamber recognized that the high cost of health care in the state was a problem, but would rather find a “market-based” solution.
According to a 2019 survey by the Colorado Health Institute, approximately 6.5% of Coloradans, or one in 15 people, do not have any health insurance. The number was much higher in some areas of the state, though, and policymakers fear the ranks of uninsured people swelled as those who lost jobs during the pandemic also lost their employer-provided health plans. For those who still have private insurance, affordability problems persist.
A 40-year-old person living in Pueblo would have to pay premiums of at least $286 a month on the lowest-cost individual health insurance plan they could buy on the state’s exchange.
In Fort Collins, the same person would pay $313 in premiums on the lowest-cost individual market plan.
“We hear from constituents all the time, especially in our rural, frontier and mountain communities, that health care is simply too expensive for families to afford,” Lt. Gov. Dianne Primavera, a Democrat, said during the news conference. “The Colorado health insurance option is a balanced approach to bring more affordable health insurance options in the individual and small group health insurance markets.”
The introduced bill also allows insurance carriers to calculate their premium reductions for individual plans without accounting for Colorado’s reinsurance program in the starting year for comparison. That’s a change from the draft legislation that Roberts said would make it easier for carriers to meet the phase one targets.
Colorado’s new reinsurance program, created through 2019 legislation, helped drive 20.1% decreases in average individual plan premium rates over the last two years. In 2020 and 2021, it resulted in an average premium savings of 20.8% for individual-plan health care consumers.
So, by excluding reinsurance savings from the calculation of premium rates on individual plans in 2021, and including reinsurance savings in calculating 2023 and 2024 rates, insurers could just keep premium rates on standard individual plans about the same, on average, from 2021 until 2024.
But reinsurance savings varied greatly by region, and the program only runs through 2025.
And Colorado’s reinsurance program does not currently affect small group plans. Premium rates on those plans increased 7.9% from 2019 to 2020 and 3.8% the following year. By adding small group plans to the bill, the sponsors have created an additional challenge for providers and insurers.