Two separate announcements from Governor Jared Polis in October provide early, but promising, signs that Coloradans will soon see new health care options, including plans with lower price tags.
On October 7, the Colorado Division of Insurance and Department of Health Care Policy & Financing issued a draft report proposing a new State Option for Colorado residents who purchase their own individual health insurance.
The State Option, which would become available in 2022 under the plan, would be sold and administered by health insurance companies but designed by the state. This State Option would not be available through group plans, such as those provided by an employer or with PERACare, but Coloradans would have the opportunity to enroll in the State Option plans directly. It is designed to be a more affordable option for health coverage, which in turn could control costs, even for those with different insurance.
The State Option would limit the amount paid to hospitals to between 175 and 225 percent of what Medicare pays, though rural and critical access hospitals would receive special protections. Currently, Colorado hospitals charge an average of 289 percent of what Medicare pays, which is higher than most other states.
Additionally, the State Option would require prescription drug rebates from manufacturers to be used to reduce the price of individual policies, something that PERA already has in place for its comparable plans. Insurance companies would also be required to direct 85 percent of premiums to pay for patient care. Those insurance companies would bear the risk for patient health expenses, just as they do today. The state or taxpayers would bear no financial risk.
A public insurance option for Colorado was one part of the health insurance legislation state lawmakers passed in 2019. Another was the creation of a state reinsurance program to help insurers cover their sickest, most expensive patients. On October 10, Governor Polis announced that individual health insurance premiums for 2020 will go down by an average of 20.2 percent across the state, due in large part to the reinsurance program. Some communities on the Eastern Plains and Western Slope will see savings of close to 30 percent for individuals purchasing these plans.
Potential Impacts for PERA Members and Retirees
While these developments only apply to the individual health insurance market and not to group plans such as PERACare, PERA staff are watching closely for signs of potential cost savings that could impact members and retirees.
According to the Division of Insurance, the reason health insurance is so expensive is that health care itself is expensive. “But lowering rates for people with individual insurance plans also helps bring down rates for everyone,” Governor Polis has argued.
One hope is that cheaper premiums will encourage more of the estimated 6.5 percent of Coloradans without insurance to sign up, reducing the amount of uninsured care that hospitals and other providers then pass on to people who do have insurance. The State Option could also publish the prices that it pays to hospitals, increasing transparency and creating even more pressure to hold down prices for everyone.
Colorado PERA, in its work with other employers and providers of group health insurance through the Colorado Business Group on Health, is looking closely at how hospitals and providers are paid compared to Medicare payments, similar to one of the key strategies of the State Option from the Polis administration. PERA staff are closely following its progress and considering how Pre-Medicare PERACare enrollees might benefit in the future.
The state agencies that developed the State Option proposal are accepting written comments on the plan until October 25.