DENVER – Colorado’s reinsurance plan, passed by lawmakers in the final days of the legislative session, promises to reduce individual insurance premiums on the Western Slope by 30%, bringing relief to mountain towns like Durango where seasonal and transitional workers struggle to afford insurance.
The plan, House Bill 1168, had been an important piece of Gov. Jared Polis’ roadmap to reducing insurance costs across Colorado.
It is intended to benefit Western Slope residents who purchase insurance through Connect for Health Colorado, the state’s health exchange, because they are not insured by an employer.
In La Plata County, about 3,000 residents purchased insurance for 2019 through the exchange. In Montezuma County, about 800 purchased the insurance.
The plan would pass the cost of the most expensive insurance claims onto federal government funds and hospitals, absorbing some costs typically assumed by insurers and lowering premiums for all residents who shop on the individual market.
“We are confident that we will be able to achieve that 30% reduction on the Western Slope,” said Rep. Julie McCluskie, D-Dillon.
Funded for two years, the $120 million reinsurance program will mostly rely on redirected federal insurance subsidies but also will pool money from hospital provider fees and the state’s general fund. It will apply only to the 8.7% of Coloradans who shop for insurance on the individual market – often small business owners or seasonal employees. The bill requires a reduction of 20% to 25% on plans offered in other areas of the state.
But the reinsurance program’s benefits will be particularly felt on the Eastern Plains and the Western Slope, where higher numbers of Coloradans purchase individual insurance and contend with higher prices and fewer options. Over time, McCluskie hopes the plan will expand numbers of Coloradans who buy individual insurance and encourage insurance companies to offer more options.
“If we are able to drive more people into the individual market place, and if there are more lives in that pool, then the rates will come down anyway,” McCluskie said.
McCluskie’s bill cleared several hurdles on its journey through the Capitol – including objections from hospitals, which claimed that an early version of the bill violated federal law – but still must clear two final tests: getting Polis’ official signature and receiving a waiver to use federal subsidies to fund the program.
Polis ended the 72nd legislative session with hundreds of bills to sign and has promoted the reinsurance plan as part of his administration’s effort to reduce health care costs. While receiving the federal waiver is not guaranteed, a handful of states have already received approval to run reinsurance programs, including Alaska, Oregon, Wisconsin and Maine.
“The federal government is becoming more familiar with this process,” said Vince Plymell, a spokesman for the Colorado Division of Insurance.
The DOI expects to apply for the waiver by the end of May, and hopes to receive approval by the fall, in time for the 2020 open enrollment period for health insurance.
If the reinsurance plan goes into effect, it might have the most immediate effect on insurance costs of any measure passed by the Legislature, even if it will apply only to a small group. But part of the bill’s controversy is that it does not save the state money, and instead relieves one group of higher insurance costs by passing it on to another, said Allie Morgan, director of legislative services for the Colorado Health Institute, a Denver-based policy group.
“It’s not necessarily saving money net to the system,” Morgan said. “It’s shuffling it around, but that means that there are winners and losers.”
Hospitals will be paying $40 million for the program out of provider fees. Insurance carriers will not contribute to the program unless the federal government suspends an Affordable Care Act tax, which would then be used to partially fund the program, McCluskie said.
But after two years of multiple drafts and setbacks, McCluskie expects the program to be a success.
“There are multiple benefits if we can really make that 30% reduction,” she said, referring to the premium reductions she hopes to see for her district, which spans Delta, Gunnison, Lake, Pitkin and Summit counties. “I’m nervous and excited and anxious – particularly after significant challenges. That waiver has got to come through.”