Colorado Public Health Insurance Option

Colorado is moving forward on its plans to launch its state-designed standardized health insurance plan for individual and small group markets, but a waiver the state planned to pursue with the federal government had health care providers, including insurance companies, fuming.

Critics said a portion of the waiver is an attempt at arbitrary price-fixing that could limit consumers' options to get affordable health care. 

Those criticisms — what Commissioner of Insurance Michael Conway called "confusion" over just what the waiver would have done — caused DOI to pull that portion of the waiver request. The rest of the waiver is being submitted to the federal Centers for Medicare and Medicaid Services later today.

"There is so much confusion from these comments that we decided not to go down that path," Conway told Colorado Politics on Tuesday.

The issue stems from the passage of House Bill 21-1232, which created the Colorado Option.

Under the law, if insurance providers are unable to lower premiums by 15% over 2021 rates by 2025, the state would move forward with the Division of Insurance-designed plan, which health insurance providers would be mandated to offer alongside their existing individual and small group plans.

To accomplish that, the Division of Insurance is seeking a waiver from CMS.

The controversy arose from a portion of the state's proposed waiver known as “de minimis.”

According to Amanda Massey, executive director of the Colorado Association of Health Plans, the term refers to the percentage of total average cost for benefits.

Health insurance providers in Colorado offer a three-tiered range of plans, known as "metal," that refer to gold, silver, and bronze. A gold plan would have high premiums and low deductibles. A bronze plan, at the other end, might have lower premiums but high out-of-pocket costs, with silver somewhere in between.

Here's how that translates into total costs: a gold plan requires the carrier pay 80% of the costs and the consumer 20%. A silver plan would be at 70% with consumers picking up 30%, and bronze at a 60/40 split.

Something akin to a little wiggle room, de minimis, Massey explained, is an allowable range of 2 percentage points in the cost-sharing split in each tier for carriers. 

A gold plan, under a de minimis range, could mean the carrier picks up 78% to 82% of the costs; a silver plan could mean 68% to 72%, and bronze at 58% to 62%. 

Initially, the Division of Insurance was going to ask the Centers for Medicare and Medicaid Services, which runs the Affordable Care Act, to waive the de minimis for non-standardized plans, which are the individual and small group plans offered by providers.

That ran into strong opposition from the health care providers.

Massey said such a scheme “would raise the cost of the non-standardized plans, in order to give the Colorado Option a price advantage,” which, she argued, would provide the Colorado Option with a competitive advantage over what’s available in the marketplace.

CAHP isn’t the only organization that raised red flags over waiving de minimis.

The Colorado Hospital Association questioned the effect of waiving the range, stating in a Nov. 15 letter to Conway that de minimis “is a critical consumer protection that provides consumers important information surrounding a plan’s benefits."

The group added: "As proposed, CHA is concerned that the waiver currently requested could have unintended consequences when expanded to the rest of the market, potentially increasing premiums for non-standard plans and reducing consumer options for affordable health coverage.”

The Denver Metro Chamber of Commerce called the waiver request “arbitrary price-fixing” to benefit the Colorado Option, but which, the group indicated in its Nov. 15 letter, could backfire.

That could result in hospitals and health care providers unable to cover their losses, and then shift the costs to employer-sponsored health plans, the chamber said, adding, “This effort seeks to limit market competition in favor of the Colorado Option."

Doctors affiliated with the Colorado Medical Society echoed the same concerns.

In a Nov. 22 letter, the medical society said the waiver is based on an “intent to decrease competition in the health plan marketplace by restricting the options that may be available to consumers among non-Colorado Option plans.” The letter pointed to the waiver request, which said “under the current allowable de minimis [actuarial value] ranges based on federal regulation, non-Colorado-Option plans could frustrate [the Colorado Option’s] goals by offering plans at a lower [actuarial value]."

The medical society said the plans are likely to have higher deductibles, "jeopardizing the impact the Colorado Option will have.”

The other risk is that the Colorado Option will be more expensive and hence less attractive to consumers, according to CAHP, the health plan association.

The group said its members have "significant concerns regarding the high pricing ... for the standardized plans compared to the carriers’ 2021 lowest-cost offering." That higher pricing, the group added, "will translate into higher premiums and will result in fewer consumers purchasing the standardized plan”  i.e., the Colorado Option.

In its letter, United Healthcare, the largest provider of health insurance in the state, said federal and state laws do not contemplate the premium reduction mandates envisioned in the Colorado Option statute. In fact, the letter continued, DOI’s plan could compromise “our shared goal of expanded access to affordable health care for Colorado consumers.”

The Colorado State Association of Health Underwriters also raised concerns, stating in a Nov. 22 letter that the waiver could create market uncertainty “by allowing the Division of Insurance to determine actuarial value ranges for non-standardized plans annually."

The group raised several questions: Will consumers who like their current plan be able to keep those plans at the same price? Will the Colorado Option plan be the lowest premium plan, "therefore constraining the market to consolidate their plan choices for consumers?"

The group said the Colorado Option plan should "compete in the market as any other plan offering and as was promised by the proponents of HB 21-1232.”

Those who supported the Colorado Option during its passage in the legislature support the waiver request.

The Colorado Consumer Health Initiative and seven partners, including the American Heart Association, said in a Nov. 15 letter that the waiver amendment would “improve affordability, access, racial health equity, and create more transparent and predictable costs for consumers when accessing services.” The letter does not detail how that would occur.

Conway told Colorado Politics Tuesday that his office will respond to the comments submitted by the health care industry and that the de minimis part of the waiver will be struck from the submission.

The rest of the waiver request, however, will still go forward, tied to a single-risk pool that was also part of the waiver the state received when it set up reinsurance two years ago. Single-risk pools help determine premiums, based on the health of all enrollees, whether high-risk or healthy.

A response from the federal government is not expected until August, 2022.

DOI has never before created a health insurance plan. Its mission, as outlined on its website, is to "regulate and monitor the insurance companies ... [and] review and analyze premiums and policy benefits, as well as insurance companies’ marketing, underwriting and claims practices." Title 10 of Colorado Revised Statutes says DOI "is charged with the execution of the laws relating to insurance, and has a supervising authority over the business of insurance in this state."

The final waiver request, and response to comments, can be found here.