Colorado has moved a big step closer toward creating a "public option" health plan program that would not get any significant state funding.

The Colorado Division of Insurance and the Colorado Department of Health Care Policy & Financing have tried to design a standard public option plan, called the State Option, that would cost about 10 percent to 15 percent less than the plans already available. They want to require all individual carriers to offer the public option plans along with their own plans, both on and off the state's Affordable Care Act (ACA) public exchange.

They want the insurers to pay the brokers a commission of about 1.4 percent to sell the State Option coverage.

If they can get permission to use federal ACA subsidy money to reduce the cost of the standard plan, they would use federal money to cut the State Option plan costs.

But "Colorado taxpayers will not fund these plans," officials say in the report.

Officials developed the report in response to Colorado House Bill 19-1004. Gov. Jared Polis, D, signed the bill in May.

The state hopes to have the State Option plans available by 2022.

Under the proposal described in the report:

The minimum medical loss ratio, or amount of revenue going to pay for health care and quality improvement efforts, would increase to 85%, from 80% today.
The government would set hospital reimbursement rates "through a public and transparent formula that ensures sustainability and helps to stabilize our rural hospitals, while preventing the price inflation currently taking place in some markets."
Plans would have to ensure that all compensation from drug plan manufacturers would be passed on to consumers.

Colorado Insurance Commissioner Michael Conway said in a statement that the officials hope to tackle the cost of care and bring more logic to the process.

"The public option is designed to help everyone in the individual market and eventually small and mid-size businesses as well," Conway said.

Insurance company and producer groups in the state say they support the public option program's goals but are skeptical about how well the State Option plans will work.

The new final report is a version of a draft officials released in early October.

CAHP and CSAHU

Officials sought comments this summer, before they began writing the draft, and again after they posted the draft.

Amanda Massey, executive director of the Colorado Association of Health Plans (CAHP), said in a comment letter sent Oct. 22 that there is nothing in the plan that guarantees that carriers can successfully offer the public option plans.

The proposal requires health plans to participate, but "nothing compels hospitals or providers to contract with health plans offering the state option," Massey wrote.

Massey also objected to the idea of carriers being required to offer specific plans.

"Colorado health plans also hold significant concerns that if such mandates are adopted, they will fail to establish meaningful or sustainable competition on Colorado's individual market, while also subjecting our state's broader health care marketplace to the risk of massive disruption and unintended consequences," she wrote.

Brad Niederman and Tim Hebert wrote on behalf of the Colorado State Association of Health Underwriters (CSAHU) that they support the goals of state officials and officials' willingness to listen but have questions about how the public option program would work.

"How will the State Option ensure premium affordability?" Niederman and Hebert asked. "How will affordability be defined and monitored?"

Niederman and Hebert wrote that the public option program draft assumes carriers, providers, and hospitals will participate in the State Option.

"What if they don't?" Niederman and Hebert asked. "How can the state require their participation?"

Niederman and Hebert suggested that the state could apply some of their ideas for holding down costs, such as a new minimum medical loss ratio standard, to the current system, without having to add a public option program.

Individual voices

Several financial professionals submitted comments on the draft recommendations.

Miles Kessler, a financial planner and insurance broker, wrote to say he sees a dire need for a public health insurance option.

"While a public option likely will not resolve all the issues plaguing health care in the U.S., it is a substantial step in the right direction," Kessler wrote.

Scott Bolitho, an insurance broker, said advocates for Colorado's public option program are using the same kinds of language that advocates for the Affordable Care Act used to promote the ACA.

When ACA drafters were promoting the ACA, "we heard that competition would be increased, and insurance companies would be rushing to join the [ACA public] exchanges across the country to sell their insurance," Bolitho wrote. "And because of the competition, pricing would be reduced. We all know that the exact opposite happened, and we have far fewer insurance companies, higher out-of-pocket costs, and premiums that have increased substantially."

A.J. Ehrle, an independent health insurance broker, offered an alternative public option proposal.

Ehrle recommended, for example, that the public option be available only in counties with fewer than three commercial carriers; that the deductible amount to 10% of income; and that the public option plan be required to pay provider bills within 45 days.

Carol Pace, a longtime Colorado consumer advocate, said she supported the draft recommendations but wanted changes.

"Do not wish to pay for your broker," Pace wrote. "That changes premiums for all of us…. Entities not required for public programs, such as brokers or the exchange, should not receive compensation for triaging consumers to the public option, any more than they receive them for directing consumers to Medicare, the VA, CHIP or Medicaid."

She also objected to the idea of ever receiving surprise out-of-network hospital bills, or having to see part of her premiums going to support "Taj Mahal hospital with unnecessary embellishments."

Links to the final report on the Colorado public option proposal, and the public comments appendix, are available here.

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CAHP and CSAHU

Individual voices

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