Federal authorities on Thursday gave the green light to one of the most ambitious items on Governor Jared Polis’ agenda: a government designed health insurance plan mandated to be sold at lower prices.
Rates and final details for the Colorado option are expected to be officially unveiled later this summer. But a critical part of getting it started was getting federal government approval known as the 1332 waiver.
The waiver gives the state leeway under the Affordable Care Act to take innovative approaches to health insurance that might otherwise violate technical parts of the law. It will also bring additional federal dollars to the state to help implement the program.
“Through this new model, Colorado is leveraging federal savings to expand affordability and coverage in the state like no other state has done before,” said Chiquita Brooks-LaSure, Administrator of the Centers for Medicare. and Federal Medicaid Services, which approved Colorado’s waiver request. said in a press release. “The Colorado Option is revolutionary and a step in the right direction to reduce the uninsured rate, while investing in affordability and improvements in health insurance coverage, and advancing health equity. health.”
Colorado Option Details
Lawmakers passed the legislation creating the Colorado Option in 2021. It instructs state regulators to draft a ‘standardized plan’ — that is, a consistent set of benefits and cost structures like copayments — that insurance companies will be required to sell across the state. Companies must also price premiums for Colorado Option plans 5% below what they charged for the plans in 2021, after adjusting for inflation. This reduction target drops to 15% below by 2025.
Colorado Option plans will only be sold in the individual and small group markets, i.e. places where small businesses and people who buy insurance in their own shop.
Since the Colorado option will, in theory, save the federal government what it is already spending on providing subsidies to help people pay their insurance premiums, it creates what are called “pass-through” savings that can accrue to the state. An actuarial analysis included in the state waiver request 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 use this money to provide additional subsidies to low-income Coloradans and those who are ineligible for federal subsidies, such as due to immigration status.
Skepticism of insurers
Insurance companies this month submitted their proposed rates — both for Colorado Option Plans and other plans — for approval by the Colorado Division of Insurance, said Amanda Massey, executive director of the Colorado Association of Health Plans, a trade group. Massey said she doesn’t know if all of the Colorado Option’s proposed rates meet the price reduction target, and the insurance companies haven’t said. (The proposed rates will not be made public until next month.)
But insurance companies have feared for months that they won’t be able to meet the targets while maintaining actuarially sound rates. Massey said the Colorado Option plans are richer than a typical insurance plan — they have more stuff in them or more favorable cost structures. And she said there is concern that the way the state will calculate inflation, using the consumer price index medical index, will not keep up with the skyrocketing inflation seen on the ground.
“We believe the methodology is flawed,” she said Thursday. “So between this methodology and the added benefits of the standardized plan, we’re really concerned about meeting the reduction targets.”
“It’s really to be determined whether any of the promises made about this policy will materialize,” she added.
If insurers cannot meet the Colorado Option’s price reduction targets, the state insurance commissioner has the ability to order public hearings and impose lower hospital rates to reduce the cost. of a plane. But commissioner Michael Conway said he did not expect to use his pricing power in the first year.
Congratulations from consumer advocates
Consumer advocates cheered news of the federal approval of the Colorado option.
“This waiver is a critical part of Colorado’s efforts to expand health coverage and make it more affordable for everyone living in Colorado,” Adam Fox, deputy director of the Colorado Consumer Health Initiative, said in a statement.
In his own statement, Jake Williams, executive director of Healthier Colorado, said: “At a time when Colorado families are paying unprecedented prices at the pump and at the grocery store, we want them to know that relief is on the way. on the way.”
Approval of the federal waiver also extended another of Polis’ flagship healthcare initiatives – a reinsurance program that helps insurance companies pay their most expensive claims, allowing them to reduce prices. bonuses for everyone. The Polis administration estimates that reinsurance reduces insurance prices for people in the retail market by 20% per year.
Polis has made his efforts to save Colorados money the centerpiece of his re-election campaign, and he capitalized on Thursday’s announcement to promote that work.
“I am thrilled the Colorado waiver has been approved, allowing us to move forward with this historic, forward-thinking, money-saving program in Colorado,” Polis said in a statement. “Saving people money on health care couldn’t come at a better time.