Colorado Democrats Preview Public Insurance Option Plans

Democratic lawmakers in Colorado have unveiled a bill they hope will create a public health insurance option for consumers and also lower health care prices by making the insurance market more competitive.

Sponsors of the bill, known as the Colorado Affordable Health Care Option, argue that it will increase competition in the health industry because it would give consumers on the individual market another choice for medical insurance. A major hurdle, however, if this is to work, must include buy-in from hospitals and insurance companies, many of which oppose the proposal.

What the bill seeks to achieve

The bill, sponsored by Sen. Kerry Donovan and Reps. Dylan Roberts and Chris Kennedy, seeks to create an option that is offered by private insurers under state supervision. The legislation will set hospital and drug pricing, particularly in underserved areas.

The proposed legislation is targeting counties that have only one option in an attempt to create competition and lower premiums.

Hospitals would be required to participate in the plan beginning Jan. 1, 2022. Hospitals refusing to participate in the option plan could be issued a warning, have fines imposed, or see the hospital’s license suspended, revoked, or have conditions imposed by the Department of Public Health and Environment.

The bill’s sponsors think that if insurers are compelled to enter the market — especially the 22 Colorado counties with only one insurer — the plan could drive down individual market premiums by 7 to 20 percent.

Under the terms of the proposed legislation, an advisory board would be created to advise and make recommendations to the commissioner of insurance on all aspects of the Colorado option plan. The bill authorizes the commissioner to promulgate rules to develop, implement, and operate the Colorado option plan. The commissioner will be tasked with expanding the Colorado option plan to the small group market, establishing a hospital reimbursement rate formula and

requiring carriers to offer the Colorado option plan in specific counties.

Hospital reimbursement rates could be increased if a facility has a large uncompensated or under-compensated patient load.

“The health care industry isn’t working for Coloradans. Everywhere I go I hear people struggling with not being able to access or afford the care they need. The Colorado Affordable Health Care Option is a unique, balanced solution that works to address the high cost of health care by asking big hospitals to be part of the solution to increase choice and lower costs,” Donovan was quoted as saying.

The Associated Press reported that Democratic Governor Jared Polis has placed health care coverage and affordability among his highest priorities since taking office last year. The agency reported that to date, Polis and Colorado’s Democratic-controlled Legislature have created a reinsurance market to compensate private insurers for their highest-cost cases; mandated hospital price transparency; adopted consumer protections against surprise out-of-network medical bills; and launched an effort to import cheaper prescription drugs from abroad.

Predictable opposition to bill

Predictably, hospitals are critical of the plan, which they say “largely ignores critical components of the health care system, including insurance and pharmaceutical companies.”

Chris Tholen, the Colorado Hospital Association president and Chief Executive Officer said: “Unfortunately, despite bold promises and inflammatory rhetoric, the ‘Colorado Option’ is just a repeat of failed policies. It fails to expand coverage to the overwhelming majority of Colorado’s uninsured. The ‘savings’ benefit only a select few. And it will weaken the state’s health care system on which so many Coloradans rely.”

Tholen said the Colorado option proposal is “untested and is based on a flawed policy – rate setting – that has been attempted and failed in nearly a dozen other states.”

Washington is the only U.S. state so far to adopt a public option. It was introduced in 2019.

Other efforts to bring health care costs down

There are several efforts to reduce the price of healthcare across the country.

For example, in Illinois, House Democrats introduced a number of bills they hope will tackle out-of-control prescription drug prices. One of the bills seeks to create a Prescription Drug Affordability Board to set a price limit in Illinois for certain drugs that have high launch prices or large price increases. However, the bill has been stalled in committee for two years.

At the federal level, the Trump Administration is turning its attention to the “secretive nature” of health care pricing. The administration feels that there is a need for public disclosure of the oft-secret prices healthcare facilities and providers negotiate with medical insurance companies.