HB21-1232 Standardized Health Benefit Plan Colorado Option (Donovan (D)) [Roberts (D), Jodeh (D)]

SIGNED INTO LAW

AMENDED: Very Significant

Appropriation: $1,619,637
Fiscal Impact: About $2 million a year

Goal:

• Requires commissioner of insurance to develop a standardized health benefit plan for insurers called the Colorado Option. Plans must be at least ACA bronze, silver, and gold levels of coverage, include the essential benefits package required under the ACA, have designed benefit and cost sharing, and provide first-dollar, predeductible coverage for certain high-value services that reduce racial disparity in health outcomes such as primary care and behavioral health care as appropriate. Commissioner must work with stakeholders (see Description) to create the plan and it must be designed to improve racial health equity through variety of means including perinatal coverage. It must be actuarially sound
• Carriers only have to offer the Colorado Option if by January 2023 they have not reduced their premiums by 10% compared to 2021 (county by county comparison) and by January 2024 if they have not reduced their premiums by 20% compared to 2022. Insurers must set a goal of offering the standardized plans at 10% less in 2023 and 20% less in 2024 than 2021 rates. All of this is for both the individual and the small group markets. Beginning in 2025 insurers are encourage to reduce their price increases by no more than inflation plus 1% must offer the plan on the individual and small group markets beginning in 2023. The commissioner cannot force insurers to offer the plan in any county where the insurer doesn't offer insurance. The premium rate for the plan must be at least six percent less than the premium rate plans offered by the provider in the same county in 2021, adjusted for medical inflation. This will be calculated by the commissioner of insurance. If the insurer didn't offer coverage in that county in 2021, then the rate must be 6% 5% less than the average of all rates in the county in 2021 in that market (so individual for individual plans, small group for small group). In 2024 this rate reduction must be 12% 10% as compared to 2021. In 2025, 18%15% compared to 2021. Thereafter premiums can only increase by medical inflation.
• Commissioner to create fee schedule for the Colorado Option to pay providers. Commissioner may take into account circumstances of critical access hospitals (only hospital serving area), rural and independent health care providers (not part of any larger system), and providers that serve a higher than average number of uninsured and/or Medicaid patients. May also consider cost of adequate wages, benefits, staffing, and training for providers’ employees to provide adequate care. By 2025 these reimbursement rates must achieve the 20% reduction in premiums goal and the inflation+1% goal thereafter.
• If insurers cannot meet these rate requirements and keep network adequecy (see Description), the commissioner can, after a public hearing, modify provider reimbursement rates. Base reimbursement for hospitals must not be less than 155% of the hospital's Medicare or equivalent reimbursement rate. Essential access hospitals or hospitals that are not part of any network (so unaffiliated with other hospitals) get a 20% increase and if a hospital is both (essential and unaffiliated), 40%. Hospitals that exceed statewide average of Medicare or Medicaid patients get up to a 30% increase, actual amount based on their actual number of such patients. For hospitals that prove efficiency in managing care based on margins, operating costs, and net patient revenue, up to a 40% increase. For pediatric hospitals with a level one trauma center, a 55% increase and no other increases (so doesn't matter if they qualify for any of these other increases). For providers, rates must be a minimum of 135% of the Medicare rate for the same service in the same area. But the commissioner cannot decrease rates for any hospital by more than 20% in one year. The commissioner can also force providers hospitals to accept these rates (in other words force them into accepting the Colorado Option) in order to ensure network adequacy but it cannot force providers (except for hospitals that provide a majority of services through a single contracted medical group for a non-profit HMO) to work with specific insurers. Commissioner must contract with a third-party organization to determine how to best phase-in these new rates using a quality metric adjustment and an acuity adjustment as measured by the hosptial's case-mix. Evaluation must be complete by end of 2022
• Providers are banned from balance billing consumers in the Colorado Option, which means they cannot charge consumer more than the Option reimburses for services
• Every health care provider in the state must accept the Colorado Option, except the commission may exclude providers from the fee schedule or change it if the provider can demonstrate it will reduce its ability to accept or provide coverage to the uninsured and Medicaid/CHP+ patients
• Creates the Colorado Option Authority, which is to operate as an insurer in Colorado only if all insurance carriers fail to meet the 10% or 20% rate reduction goals. Board is a quasi-public entity (it operates independently from any branch of government but is not a private corporation) governed by a board. Board must also appoint an advisory committee to help it carry out its work. Authority requires a waiver from the federal government to capture savings in Medicaid to use to fund the Authority. Commissioner must consult with an advisory board created by the bill to adminster this bill. Committe must also consider recommendations to streamline prior authorization and utilization management for the plan, ways to keep health care services in the communities where patients live, and consider alternate payment models for particular services, keeping in mind the impacts of such models on people of color. Bill also creates an insurance ombudsman to advocate for consumers in any public hearings on rates or access required by the bill. Ombudsman also to evaluate the Colorado Option for network access and affordability and interact with consumers regarding any issues with the plan</span.

Description:

The network requirement for the plan is one that is culturally responsive and to the greatest extent possible reflects the diversity of its enrollees and is no more narrow than the most restrictive network the carrier is offering for other plans in the area. When carriers develop networks for the Colorado Option, they must include as part of the network a description of the carrier's efforts to construct diverse, culturally responsive networks that are well-positioned to address health equity and reduce health disparities and include a majority of the essential community providers in the service area. Carriers must file action plans with the commissioner if they cannot construct an adequate network

Premium rate reductions must account for policy adjustments deemed necessary to prevent people with low and moderate income from experiencing net increases in premium costs (lots of people get subsidies for their insurance from the federal government). Commissions paid to insurers for plans must be comparable to the average commissions for other plans in the market.

The reimbursement rate structure set by the commissioner is available to other health care plans, including co-operatives, if the commissioner approves.

Commissioner must consult with employee membership organizations representing health care providers’ employees in the state and with hospital-based health care providers in setting reimbursement rate formulas.

Stakeholder process for creating standardized plans must include physicians, individuals who represent health care workers or work in health care, health care industry and consumer representatives and individuals working in or representing diverse communities. Diversity is defined as race, ethnicity, immigration status, age, ability, sexual orientation, gender identity, and geographic regions of the state affected by higher rates of health disparities and inequities. Commission can update the plans annually by rule. If insurers are offering them, Standardized plans must be offered in a way that allows consumers to easily compare them.

Requires the commissioner to contract with an independent third party to analyze the impact of this bill on health plan enrollment, health insurance affordability, and health equity. This must be disaggregated by race, ethnicity, immigration status, sexual orientation, gender identity, age, and ability to the extent possible. It also must include information on total out-of-pocket spending. Report due by January 2026. Commissioner must also contract with an independent third party organization to analyze the effect of this bill on staffing, wages, benefits, training, and working conditions of hospital workers and as it relates to provider workload. This must produce three different reports, one in July 2023, then July 2024, and then July 2025. State must report to the legislature on the implementation and effects of this bill every year.

Carriers can take reimbursement rate disputes with providers to non-binding arbitration. At any public hearing regarding rates, alll affected parties must be allowed to testify (insurers, hosptials, providers, consumer advocacy organizations, individuals, and the ombudsman). The hearing must be limited to the reasons why the insurer cannot meet either the premium reductions or network requirements. All rulings by the commisioner are appealable in district court.

If an insurer working with a co-op has previously achieved 18% reductions in premiums, regardless of first year benefit plans were offered, that plan is deemed to comply with the requirements of this bill (so no Colorado Option needed).

When considering premium amounts and if they meet the reduction requirement, the commissioner must take into account actuarial differences between the Colorado Option and health plans offered in 2021, any changes to the Colorado Option, and any federal or state law changes after 2021 that would affect premiums. For the purposes of reimbursement rate setting for an insurer who failed to meet the reduction requirements, the insurer must provide reasonable information to identify which hospitals or providers were responsible for the failure (or for failing to meet network requirements).

Commissioner is barred from using failure of insurers to meet Colorado Option rate reduction or network requirements in consideration of approval of other plans from the insurer (all insurance plans must already be approved by the commisioner in this state)

Bill bans cost shifting between the Colorado Option and other insurer plans (jacking up rates on the plans they control to cover lost or less money coming in on the Colorado Option). Failing to comply with the terms of the law subjects license holders to discipline from the state, including unprofessional conduct charges. hospitals to discipline on their license, including having it revoked suspended. Hospitals can be fined up to $10,000 per day for the first 30 days it fails to comply and up to $40,000 a day for each day after. Providers can be fined up to $5,000 (just a flat fine) and are not subject to any other discipline.

If the federal government creates a federal public option for insurance that is as good or better than the Colorado Option, then the entire Colorado Option and Authority are repealed. State is to ask federal government for an innovation waiver so as to capture all applicable savings to the federal government from this bill for the state. If approved, the state is to give that money to the already existing Colorado health insurance affordability enterprise to increase the value, affordability, quality, and equity of health care coverage for Coloradans historically and systematically disadvantaged by health and economic systems.

Board members are appointed by governor, require Senate confirmation, and serve four-year terms. They receive a per diem and reimbursement for expenses. Board is subject to state open meetings laws. It must hire an executive director to run the Authority. It may contract with other state agencies to implement the Colorado Option., board is composed of 11 members and the governor must strive for a diverse board and try to ensure at least a third of the board members are people of color and that rural areas of the state are represented.

Additional Information:

Arguments For:

Bottom Line:

• Multiple regions in the state still struggle to obtain affordable and useful insurance—10 counties had access to only one insurer through the state exchange
• Health care is different than any other thing we purchase: we don’t price out our options, we don’t understand our costs and options, we don’t have choice of insurers in most cases, and we can’t just not get care
• Insurance companies remain extremely profitable with net profit margins higher than before the introduction of the Affordable Care Act in 2010 and hospitals in this state are wildly profitable (pre-COVID), 2^nd highest profitability rate in the nation. Both can afford the 10% and 20% 18% 15% reductions the bill calls for and still provide service (and yes, make a profit)
• By providing rate flexibility to various providers that are actually struggling right now that serve Medicaid patients or are critical access hospitals or any of the other automatic increases on the list, the bill could actually help them more than the status quo
• The bill gives the entire industry a final chance to put their money where their mouth is and bring down costs—only if they fail does the heavy hand of government come in

In Further Detail: Multiple regions in Colorado still struggle to obtain affordable, useful insurance. The useful clause there is important, low-cost mostly useless insurance doesn’t do anymore much good and is the system we had before the Affordable Care Act when bankruptcy from health care costs was considered a normal thing in this country. 10 counties had access to only one insurer through the state’s exchange in 2020. The federal government doesn’t seem like it is going to do anything to address this, so it is up to us. Free markets have utterly failed in this industry for several very good reasons. First, consumers do not “price” their health care options. It is nearly impossible to do so even if you wanted to shop around at various providers. Second, consumers mostly do not have the choice over their insurance to begin with, since the vast majority get it through their employer. And most importantly, we cannot choose to not get health care. We all need it and we cannot choose when we need it. And so we have two choices: offer insurance through the government where the government is in essence the insurance company and pays out all claims (similar to the Canadian system) or create and manage an insurance option. In essence, attack head-on the problems we all see in the health care marketplace through an insurance plan that must be offered throughout the state. We passed a bill two years ago to explore this issue and the committee it created recommended this solution. A Canadian type system just does not fit with state finances (multiple other states including Vermont and California have explored this and come to the same conclusion). So what are these problem areas? First, insurance companies themselves, who remain an extremely profitable industry, with net profit margin higher than before the introduction of the ACA (3.4% in 2018 and rising) on vastly increased revenues (thanks in part to all of those new ACA customers). Second and most importantly, a big part of this is hospitals. Denver-area hospitals made a record $2 billion in profit (yes profit, not revenue) and prices overall in the state grew 70% between 2009 and 2018. In the state, hospitals are now profiting (again, profiting) at $1,518 per patient in 2018. That number was $538 in 2009. A 280% increase in pure profit. Coloradans have lost billions of dollars just so these hospitals can make more money, mainly through charging non-Medicare and Medicaid patients far more than they need to offset any potential losses. We have the second highest hospital profits in the entire country, the fourth-highest administrative expenses (non-medical care—you don’t profit on salaries but you can compensate your executives highly, like over $5 million a year for the CEO for instance), and the second-most hospital construction in the country, despite the fact that we are one of the healthiest states in the nation. And this is an industry dominated by “non-profits” (over ¾ of the hospitals in the state) who aren’t supposed to care about making a profit at all. These non-profits have cut spending on charity care by 2% according to the latest tax data available while instead money is plowed into unnecessary construction (our occupancy rate is below average for the country and dropping) and stockpiling of “reserves”. All of that extra cost gets passed on to us through insurance premiums. And yes, this is all pre-pandemic numbers. The industry has been hit hard by the pandemic but we should absolutely not make public policy based on once in a generation problems that are right now starting to fade (and will fade more rapidly with more vaccinations). Probably the most controversial part of this bill will be the rate setting, providers of course face similar issues with Medicaid and Medicare but have more flexibility to opt-out of providing some of that care. The break-even point for most hospitals is believed to be at about 143% of Medicare rates. In 2019 hospitals were charging an average of 280%. Between just that and insurance profits, it is easy to see all of the money being drained out of our pockets in this industry. Then of course we want to not have a one size-fits all rate but target hospitals in specific circumstances (including having more of those low fee Medicare and Medicaid patients) for higher reimbursement rates. No one wants to run hospitals out of business or put added stress on hospitals that are already struggling (thus the ability to also have a complete exemption from these rates). We just want to reign in one of the worst systems in the entire country when it comes to cost. So yes, the state sets reimbursement rates and those rates may in fact drive other insurance plans offered in the state to negotiate their own rates from a place of power, rather than their current place of weakness in the face of the monopolistic structure of our hospital system (where there has also been a lot of consolidation of ownership). That is in fact the entire point. We do not need the most profitable hospital industry in the nation. The design of the bill may actually also raise reimbursement for some hospitals who are not part of a big system, critical care locations, and efficiently serving high numbers of Medicare and Medicaid patients (for last year’s bill, the media found found at least 10 hospitals, all rural, that they believe will actually see rate increases, since this year’s does not have specified rates in the bill, it is impossible to know for sure if the number will be similar and the numbers in this bill are exactly the same, so the same analysis holds). And those are precisely the hospitals that are currently struggling and the ones we want to reward. The bill also protects against two main areas of concern with a state-backed plan: that insurers will simply shift costs to non-Colorado Option plans and that those on subsidies will be negatively affected. For the first, the commissioner of insurance can deny any rate change that is a cost shift (all plans must be approved by the commissioner to appear on the marketplace right now). As for the alternative total cost of care model proposed in arguments against, this is a model that fails to acknowledge that our current spending is wildly out-of-control and instead locks that spending level in and just tries to “limit” future growth. Massachusetts may believe they have saved money by using this plan compared to nothing at all, but insurance premiums and out-of-pocket expenses have grown there by more than their targeted maximum growth figure (which was 3.8%, well above inflation). So it may be somewhat helping but it by no means gets a full handle on the problem. The final point is the concern over insurers fleeing the state entirely. This gets parts of the equation here wrong. Insurers are going to love the reimbursement rates set on hospitals, if it even occurs, and if it doesn't, they'll love the lower reimbursements that allow them to get premium costs down (who also aren’t going anywhere) and are going to love the bargaining power this option gives them when it comes to their own plans. Which brings us to the final, and most important part of this bill. The medical industry has been telling us for years that they can handle bringing down skyrocketing costs without the heavy hand of the government. Well, here’s their chance to prove it. All of the heavy government intervention only occurs if the private sector fails. And if it does fail, then yes, insurers will face competition for an in-essence non-profit government operation that every single provider in the state must accept.the state will step in and start setting rates. Because we are doing waiting on false promises and ready to see some action.

Arguments Against:

Bottom Line:

• More free market innovation is the way to bring down costs, get the government out of the way and let insurers provide plans with more flexibility in terms of what they cover
• The market is also improving right now, it was 14 single-serve counties in 2019 and insurance premiums in these areas are dropping
• The bill sets out an impossible task for the industry and then when it inevitably fails introduces government intervention on steroids: commissioner of insurance setting rates for the entire state (so price controls) and the ability to require all some providers to participate
• Hospital profitability is more complex, it includes profits from investment income and we need new construction as one of the fastest growing states in the country
• Health care is also just plain expensive, due to the really high cost of research and development of new drugs, new procedures, and new technology
• Instead of a government smackdown, we should go with the collaborative model used in Oregon and Massachusetts (hardly conservative bastions) whereby the state works with the industry to set cost growth goals and works with individual providers who fail to meet them. Massachusetts believes it has saved billions of dollars with such a program

In Further Detail: Getting costs down by getting more free market innovation into the space is the right way to go, not more government involvement. There is a reason why there are few insurers who want to provide coverage in these counties and that is because of the high cost of delivering health care in these areas. Thanks to the Affordable Care Act, these insurers cannot offer lower cost plans that do not cover as much, so everyone is stuck with high priced plans. We need to get government out of the way, not more deeply involved as this bill envisions. It is also important to note that the number of single-serve counties is dropping (it was 14 in 2019) and insurance premiums on the exchanges in these areas are also dropping (thanks in part to a reinsurance bill passed by the state in 2019). In essence, this bill gives an enormous amount of power to unelected government officials to basically set the health care market for the entire state. The commissioner of insurance gets to create this plan and its requirements and tell providers exactly what they are allowed to charge for services. It is government price controls, plain and simple. This is government intervention on steroids. Oh yes, it only happens if the industry fails the test the state sets out for it, which is a basically impossible goal with two or three years to achieve. The bill wants the industry to fail. For hospitals, there is a lot to unpack here. First, the profit numbers include profits from investment income (reserve funds, which no one denies a hospital should have, don’t just sit in a bank account), and the profits due to just patient care drop the profit margin from 10% to 4%. And of course we need new construction, we are one of the fastest growing states in the country. We might be somewhat under-capacity right now, but we know more people are coming. And when it comes to cost, the fact that no one like to talk about is that health care innovation is incredibly expensive. All of the work that goes into creating new drugs and new equipment and new procedures that benefit us all must be paid for. And hospitals frequently have to make significant capital investments in that new equipment just to keep up. But yes, there probably is extra cost here that could be addressed. But instead of government pricing controls, we should look to the model used in Massachusetts and Oregon (hardly bastions of conservative thought). This is a total cost of care model that sets a desired target for how much health care spending can grow and then work with hospitals that do not meet the target (including public hearings and a formal improvement plan). Massachusetts believes it has saved billions with this program and we can do the same here in Colorado by working with the hospital industry, not in conflict with it. And that truly is the bottom line here, a collaborative approach with all elements of this industry to foster innovation and competition by removing government oversight. Then consumers can pick options that work best for them, which in a free market drives money to the best operators in the industry, including those with the best costs. Because this plan runs the risk of insurers and hospital providers deciding they don’t want to participate in Colorado at all. The commissioner of insurance or state government cannot force them. So instead of creating more options and lower costs, we could end up with fewer options as these companies flee the state entirely and we are left with a single government insurance plan with lower quality providers that don’t adequately cover the state’s needs.

Bottom Line:

• One too many threads have been pulled out of this, but allowing everyone except hospitals to refuse to accept the Colorado Option, it may be doomed to failure. Because what provider is going to want to take the potential mandatory haircut on their profits when they can just ignore the plan? If the plan has poor network coverage in the state, then it becomes useless. It is very important that this succeeds out the gate, because the folks that want it to fail aren't going to let us take multiple whacks at getting it right