Federal authorities on June 23 gave the go-ahead to probably the most ambitious pieces of Gov. Jared Polis’ agenda: A government-designed medical health insurance plan mandated to be sold at lower prices.
Rates and final details for the Colorado Option are set to be officially unveiled later this summer. But a critical a part of its launch involved winning an approval from the federal government often called a 1332 waiver.
The waiver gives the state leeway under the Inexpensive Care Act to take progressive approaches to providing medical health insurance that may otherwise violate technical parts of the law. It is going to also usher in extra federal dollars to the state to assist implement this system.
“Through this latest model, Colorado leverages federal savings to
expand affordability and coverage within the state like no other state has done before,” Chiquita Brooks-LaSure, the administrator of the federal Centers for Medicare and Medicaid Services, which approved Colorado’s waiver application, said in an announcement. “The Colorado Option is groundbreaking and a step in the suitable direction to scale back the uninsured rate, while investing in medical health insurance coverage affordability and enhancements, and advancing health equity.”
Details of the Colorado Option
Lawmakers passed the laws creating the Colorado Option in 2021. It instructs state regulators to put in writing up a “standardized plan” — meaning a consistent package of advantages and price structures like co-pays — that insurance firms can be required to sell across the state. The businesses must also price premiums for the Colorado Option plans 5% below what they charged for plans in 2021, after adjusting for inflation. That reduction goal increases to fifteen% below by 2025.
Colorado Option plans will only be sold in the person and small group markets, meaning the places where small businesses and people who find themselves buying insurance on their very own shop.
Since the Colorado Option will, in theory, save the federal government on what it already spends to offer subsidies to assist people pay their insurance premiums, it creates what are often called “pass-through” savings that may come back to the state. An actuarial evaluation included within the state’s waiver application estimates the Colorado Option will save the federal government $13.3 million in 2023, rising to $147.9 million by 2027.
The state plans to make use of that cash to offer additional subsidies to low-income Coloradans and people who are usually not eligible for federal subsidies, for example resulting from immigration status.
Skepticism from insurers
Insurance carriers submitted their proposed rates — each for the Colorado Option plans and other plans — this month for approval by the Colorado Division of Insurance, said Amanda Massey, the chief director of the Colorado Association of Health Plans, a trade group. Massey said she didn’t know if the entire proposed Colorado Option rates met the value reduction goal, and insurance firms have not said. (The proposed rates don’t develop into public until next month.)
But insurance firms for months have been raising concerns that they will not give you the chance to hit the targets while also keeping the rates actuarially sound. Massey said the Colorado Option plans are richer than a typical insurance plan — they’ve more stuff in them or more favorable cost structures. And he or she said there’s worry that the best way the state will calculate inflation, using the Consumer Price Index’s medical index, won’t sustain with the skyrocketing inflation being seen on the bottom.
“We expect that the methodology is flawed,” she said June 23. “So between that methodology and the extra advantages within the standardized plan, we’re really concerned about meeting the goal reductions.”
“It’s really to be determined whether any of the guarantees made about this policy will come to fruition,” she added.
If insurers cannot meet the Colorado Option’s price-reduction targets, the state commissioner of insurance has the power to order public hearings and to mandate lower hospital prices in an effort to drive down the price of a plan. But Commissioner Michael Conway has said he doesn’t expect to make use of his price-setting authority in the primary 12 months.
Cheers from consumer advocates
Consumer advocates cheered news of the Colorado Option’s federal approval.
“This waiver is an important component to Colorado’s efforts to expand health coverage and make it more cost-effective for all people living in Colorado,” Adam Fox, the deputy director of the Colorado Consumer Health Initiative, said in an announcement.
In his own statement, Jake Williams, the chief director of Healthier Colorado, said: “At a time when Colorado families are paying unprecedented prices on the pump and the food market, we would like them to know relief is on the best way.”
The federal waiver approval also prolonged one other of Polis’ signature health care initiatives — a reinsurance program that helps insurance firms pay their highest-cost claims, thus allowing them to scale back premium prices for everybody. The Polis administration estimates reinsurance reduces insurance prices for people in the person market by 20% a 12 months.
Polis has made his efforts to avoid wasting Coloradans money into the centerpiece of his reelection campaign, and he capitalized on June 23 announcement to advertise that work.
“I’m thrilled that Colorado’s waiver has been approved — allowing us to maneuver forward with this historic money-saving and forward-thinking program in Colorado,” Polis said in an announcement. “Saving people money on health care couldn’t come at a greater moment.”
This story is from The Colorado Sun, a journalist-owned news outlet based in Denver and covering the state. For more, and to support The Colorado Sun, visit coloradosun.com. The Colorado Sun is a partner within the Colorado News Conservancy, owner of Colorado Community Media.