Federal approval of a state waiver application means it’s full steam ahead for the “Colorado Option”: a heavily regulated, lower-cost health insurance plan that private carriers must offer starting next year.
“I’m thrilled that Colorado’s waiver has been approved — allowing us to move forward with this historic money-saving and forward-thinking program in Colorado,” Gov. Jared Polis, a Democrat, said in a written statement Thursday. “Saving people money on health care couldn’t come at a better moment.”
Last year, state lawmakers passed House Bill 21-1232 to create the Colorado Option, a standardized health benefit plan. Starting in 2023, HB-1232 requires private insurers to offer the Colorado Option on the state’s health insurance exchange, Connect for Health Colorado, to individuals and small businesses. Insurers must reduce premium rates on the standardized plan by 15% over three years.
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HB-1232 doesn’t require anyone to purchase the standardized plan. Other options will remain available on the exchange for individuals and small businesses, and most Coloradans don’t buy insurance on the exchange, so they won’t be directly affected. The law’s supporters say the new Colorado Option will especially benefit uninsured people who don’t qualify for government-subsidized health care and people who who pay high premiums. Colorado Option plans will be available for purchase during the open enrollment period, which begins in November.
HB-1232 authorized the state’s commissioner of insurance to seek a Section 1332 Innovation Waiver from the federal Centers for Medicare and Medicaid Services that would allow the state to recapture millions of dollars in expected health care cost savings from the plan.
The now-approved federal waiver will provide an estimated $135 million in federal funding annually, according to the statement from Polis’ office. That’s on top of additional millions in savings from Colorado’s reinsurance waiver program, which CMS extended through 2027.
The federal money will help support Coloradans who are ineligible for Medicaid and pay for expanded subsidies for people who buy insurance on the state’s exchange, the statement said.
“Colorado will be able to take the savings we are creating through the Colorado Option to make health coverage more affordable and accessible for those that haven’t been able to afford coverage or have been left out because of their documentation status,” Adam Fox, deputy director of the progressive-leaning Colorado Consumer Health Initiative, said in a statement lauding the waiver’s approval.
The Colorado Option legislation faced powerful opposition from pharmaceutical companies, health insurance carriers, physician groups and business groups throughout Colorado — and from Republicans, who said requiring carriers to offer a lower-cost plan would burden hospitals and providers, forcing many of them out of business and creating more barriers to care.
In May, a report from the conservative-leaning Common Sense Institute warned that the legislation does not properly account for soaring medical inflation in recent months. Though HB-1232 caps allowable growth of standardized plan premiums each year at the 10-year average annual rate of national medical inflation, the Common Sense Institute found that formula “too restrictive to properly account for the actual medical costs that the healthcare industry will face in the coming years.”
“If the Colorado Option insurance payments do not keep pace with rising costs, health care providers will likely be forced to choose between cutting services and passing on costs by raising prices for most insured Coloradans,” the May report added, referring to Coloradans who do not buy health insurance plans on the state exchange.
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