While politicians in Washington are still sparring about whether a public option should even exist when it comes to health care, Colorado is already moving down that road with the release of its next step toward creating a public option that it estimates could save consumers as much as much as 20 percent on their monthly premiums.

According to Colorado Public Radio, the state's Democratic governor, Jared Polis, has been developing a plan to do just that in his efforts to cut insurance premiums—although his efforts to address costs with hospitals have been somewhat adversarial.

"We always like to see what it looks like in black and white before we pass judgment," Katherine Mulready, senior vice president of the Colorado Hospital Association, told CPR. "However, what we have heard directly from the sponsors and certainly from the governor's office is that the proposal will include hospital rate setting with pretty significant cuts to hospital reimbursement that are not acceptable to Colorado hospitals and really shouldn't be acceptable to Colorado consumers, either."

The Colorado Health Insurance Option would, among other actions, reduce reimbursement rates to hospitals so that they're more in line with Medicare rates; on Monday the formula released by the governor's office proposed setting a base reimbursement rate of 155 percent of Medicare rates. According to CPR, that's more generous than "both the average at which Colorado hospitals break even—currently 143 percent—and at which hospitals nationally turn a profit."

The new formula was calculated based on annual data provided by state hospitals to the Colorado Hospital Association and the Colorado Healthcare Affordability Sustainability Enterprise board.

"Every county will have a new insurance option in that county, but we're not going to require every insurance company to move into every county," Rep. Dylan Roberts told The Denver Post. "We're going to allow some flexibility in that we'll look to find out which insurance companies are best situated to move into each individual county."

However, despite hospitals' objections, it actually provides for higher reimbursement rates for those that can meet a number of factors: independence, providing critical access, having a high share of Medicaid or Medicare patients and able to demonstrate that it's working to manage the underlying cost of care.

The plan also incorporates other actions meant to drive down the cost of care, such as boosting how much insurers spend on patient care by requiring 85 percent of an individual premium be spent on care. It would also require pharmaceutical rebates to be passed through insurers to consumers, and stimulate competition, in particular in the 22 counties where residents have only one option on the individual market.

If the plan advances, consumers could buy the new coverage in 2022.

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Colorado unveils plans for public option

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