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Colorado’s elected officials made their state the third to pass legislation requiring strictly regulated health insurance offers. As was the case in Washington and Nevada, the push came from supporters of a “public option,” although the final bill (HB21-1232) takes advantage of private coverage, not private coverage. public insurance.
None of the three states adopted a pure version of the public option due to the operational and political challenges of having a state-administered plan in place. Instead, they demanded the state’s existing private insurers comply with various requirements. In the Colorado case, state officials instructed carriers to offer a new “standardized health benefit” alongside their other policies on terms drafted by the insurance commissioner.
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Colorado’s law is controversial because of the wide latitude given to state officials to intervene in the plan. The general approach was to impose a set of general (and politically attractive) requirements without being prescriptive about the methods to achieve them. The State then has a substantial new power to intervene if private insurers do not respect the commitments of the law.
State health insurers claim the scheme is designed to fail because the numbers cannot add up. The law requires insurers to offer a generous benefit package, include many providers in their networks, and pay minimum fees for hospital services, while reducing their premiums.
The hospital association was neutral on the final bill after it was amended to place floors on their reimbursement levels. The state medical corporation was also neutral after the Senate removed the requirement for doctors to participate in the plan.
The following is a brief summary of the main provisions of HB21-1232:
- From 2023, health insurers are required to offer standardized health plans in the same markets in which they sell individual and small group policies. New plans must be offered both on and outside of the Affordable Care Act (ACA) exchange.
- Benefit design will be consistent across the industry and build on ACA metal levels with an expansion of pediatric services covered. The specific benefit requirements will be drafted by the state’s insurance regulator after a consultation process with industry and advocates. Primary care and behavioral health must be fully covered even before annual deductibles are met.
- The premiums for new plans are capped. In 2023, insurers must offer coverage at least 5% cheaper than the average premium they billed in 2021 (after taking into account medical inflation in 2022 and 2023). In 2024, the savings on premiums must be at least 10% and, in 2025, 15%. In 2026 and beyond, premiums cannot increase faster than medical inflation.
- Insurers must comply with extensive network adequacy rules to ensure easy access to care, including for populations that have historically been faced with obstacles when seeking services.
- Insurers who fail to meet government targets need to identify the barriers preventing compliance. The commissioner is then authorized to conduct a public inquiry and impose a solution, which may involve forcing hospitals to participate and accept in payment the full level of reimbursement that the state deems appropriate.
- Insurers must pay minimum fees to various categories of hospitals related to Medicare tariffs. The base floor for all hospitals is 155 percent Medicare. Essential access hospitals receive at least 175% Medicare, while pediatric facilities receive a minimum of 210%. Hospitals serving an above-average number of Medicare and Medicaid patients must be paid at least 185 percent of Medicare rates.
- Participating practitioners, including physicians, must be paid at least 135% of Medicare rates.
- Hospitals refusing to adhere to the standardized plan can be fined up to $ 10,000 per day for the first 30 days of non-compliance, and $ 40,000 per day thereafter.
- State officials are authorized to submit a Section 1332 waiver to the federal government for any additional federal funding that may be available to support the plan.
- The governor should appoint an advisory board with a diverse membership to provide commentary on the emerging plan.
With three states now pursuing similar plans, a pattern is emerging. The creation of a new state-administered insurance scheme – a true public option – is not possible at this time. A more achievable goal is to impose strict cost reduction requirements on existing private insurers.
The challenge will come when the goals come into open conflict. State officials want more generous coverage, broad access to providers (with payment rates far higher than Medicare pays), and lower premiums. Insurers say it is not possible to have all three, and something has to give. The only sure bet is that the debate will continue.
James C. Capretta is a columnist for State of Reform and is a senior fellow at the American Enterprise Institute.