The state of Colorado proposed an insurance option this week that could offer relief to residents paying some of the highest insurance premiums.
The new public insurance option could lower premium costs for consumers purchasing insurance for themselves by 10% to 18% by capping the amount of reimbursement hospitals receive for care, according to the draft plan.
The plan is called the “state coverage option,” but it would not be funded with state taxes or administered through the state. Instead, every insurance carrier over a certain size in Colorado would be required to sell the plan.
For example, insurance carriers, such as United HealthCare and Aetna, would carry the public option under a uniform name and compete for customers based on supplementary factors such as customer service, said Michael Conway, state insurance commissioner.
“Our intent is to increase competition,” he said.
The plans are expected to be available in 2022 to individuals through Connect for Health Colorado, the state health exchange, and on the traditional insurance market.
This year, 3,000 La Plata County residents and 800 Montezuma County residents purchased insurance through the exchange.
The cost savings would come by capping reimbursement rates to hospitals at 175% to 225% of the Medicare rate. Insurance carriers on the state health exchange currently reimburse hospitals at about 289% of Medicare.
Medicare is a national federal benchmark for reimbursing hospitals, but it doesn’t cover the care hospitals provide, said Joe Hanel, a spokesman with Colorado Health Institute.
The new reimbursement rates would be on par with those in other states and should not harm hospitals, Conway said.
The state also plans to work with rural hospitals and ensure the caps would not harm them. The state wants to work with hospitals so that it doesn’t have to compel them to accept the new rates, he said.
The plan would also save consumers money by requiring insurance companies to spend 85% of all the money they collect in premiums to pay for patient care, an increase from the federal minimum of 80%, according to the plan.
The state may also apply for federal funds that could help lower deductibles and other out-of-pocket costs for consumers, the plan said.
The Colorado Hospital Association is concerned the new public option could upset the health insurance market.
“Patients could choose to leave their current coverage to choose the public option, which could destabilize the current health insurance market,” said Chris Tholen, executive vice president of the association, in an emailed statement. “The association is also skeptical about what appears to be the first step toward price control or rate setting as well as an intent to make provider participation mandatory.”
Guinn Unger, a founder of the health care education group Healthcare Durango, said the new insurance option likely would have limited impact on residents.
“How many people can’t afford health care but could afford it if it cost 9% less? Obviously, there is going to be some; I don’t know how much impact that is actually going to have,” he said.