Colorado Lawmakers Bring Back Bill to Help Insurance Companies Cover High-cost Health Claims
In an effort to drive down insurance premiums in the state, Colorado lawmakers will once again consider creating a program to help insurers cover their sickest - and therefore most expensive — patients.
Legislators introduced a bill Friday in the House to create a reinsurance program.
The legislation, if passed, would create a state fund to help insurance companies cover high-cost claims. By controlling costs for insurers, lawmakers hope to lower premiums for everyone buying health insurance on the individual market by as much as 35 percent.
“I know of families in my community who are priced out of the individual insurance market place,” said Rep. Julie McCluskie, a Democrat sponsoring the bill. “The premiums are so high that they are scrambling to try to find other alternatives to make sure they have the coverage they need for good health.”
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The bill will be able to be repealed after five years - a provision added because lawmakers view reinsurance as a method to lower premiums while they tackle the “deeper needs in our health care system,” she said.
A similar bill was presented last session, but failed to get through the Republican-controlled Senate amid concerns that a reinsurance program does not tackle the direct causes driving high premiums, said spokesman Sage Naumann.
Still, the program - often called insurance for insurance companies — has stayed in the forefront of discussions about health care costs in the state . And now, the Democrats control both chambers in the statehouse.
It was among the initiatives Gov. Jared Polis called for during his campaign, including it in his 100-day plan .
How it would work
If the bill passes, it will create a state fund that will help insurers cover costs once a patient incurs a certain amount of health care claims. The threshold for when the program begins to pay out has not yet been determined.
Once it kicks in, the fund will contribute to a unknown percentage of the individual claims, with a cap on the amount of reimbursements it pays.
By the time the fund begins to help cover costs, a patient will have already reached their deductible and out-of-pocket maximum, meaning any expenses not covered by the program will fall on insurance companies.
If the bill passes, Coloradans could see monthly insurance premiums cut by 10 percent to 35 percent, depending on where they live, McCluskie said.
And they could see those reductions, she said, by the start of the next open enrollment period later this year.
How it would be funded
The state Division of Insurance is working on a study, which will be finished by the spring, that will provide better insight into how much the reinsurance program would cost.
But estimates place the cost between $270 million and $340 million, said Michael Conway, the state’s insurance commissioner.
The cost of the program will be shared by the state and federal government.
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By lowering the cost consumers pay for premiums on the individual market, the federal government will not spend as much on subsidies. So if the bill passes, Colorado will request a waiver from the federal government to allow the state to shift those tax savings into the reinsurance program, Conway said.
The state’s share of the program cost would be an estimated $80 million to $130 million, he said.
The state would pay for its share via savings created by reducing the amount of reimbursements paid to hospitals and other health providers.
What it means for health care providers
Under the bill, hospitals and other providers would see the amount they are paid for health services slashed as the program will create a fee schedule - a list of prices that will be determined by the commissioner of insurance.
The fee schedule would be used once the reinsurance fund starts to contribute to individual claims.
With the fee schedule, hospitals will be paid at a lower rate than if an insurance company was solely responsible for costs. But the reimbursements will be higher than payments from government programs, such as Medicaid and Medicare, Conway said.
The rate the reinsurance fund would pay has not yet been determined.
The reinsurance bill is already drawing concern from the Colorado Hospital Association, which does not take official positions on bills until they are introduced.
“Without a question, there will be hospitals that will have to face tough decisions on how to bear these cuts,” including through layoffs or getting rid of services, said Katherine Mulready, senior vice president and chief strategy officer for the organization.
Anticipating the struggles some facilities might face under the program, lawmakers have included a provision in the bill to exclude primary care and behavioral health providers from reinsurance, McCluskie said.
“The commissioner of insurance would be charged to develop some sort of metric on how we protect those providers that might not be able to sustain their services under the reinsurance program,” she said.
Updated 11:35 a.m. Feb. 4, 2019 This story has been updated to correct the title of Michael Conway, the state’s insurance commissioner.