Colorado Introduces New “Public Option” for Health Insurance. We’re Skeptical.

Colorado is one of the first states in the nation to roll out a “public option” for health insurance consumers.

Colorado Public Option for Health Insurance

When Governor Jared Polis signed the legislation last year, Colorado became the second state after Washington to authorize a public health insurance option for the individual and small employer market. More states will likely follow.

The Department of Health and Human Services recently approved Colorado’s request for a waiver allowing it to fully implement the plan.

Starting in 2023, the new “Colorado Public Option” plan is available to all Colorado residents who buy their health insurance on the individual market (i.e. not from an employer), as well as to small employers with fewer than 100 employees.

The new plan competes alongside private sector insurance companies, but offer premiums an estimated 22.3% lower, on average, according to plan advocates.

Colorado has also rolled out a state-level subsidy plan, intended to lower costs for those who don’t qualify for subsidies under the Affordable Care Act.

To do so, the government has created a new bureaucracy of central health planners – the Colorado Public Option Authority – to administer the plan.

The Dream: Possible Benefits of the Colorado Public Option

First, let’s look at some of the proposed benefits:

Proponents claim that the new Colorado Public Option will result in average premium reductions by up to 14% statewide, and increase enrollment in individual market health insurance plans by up to 11%, which equates to about 10,000 individuals.

They also claim that the full proposal will lower average statewide individual market premiums by about 22.3% in plan year 2023, and that individual market enrollment will increase by about 4.1%, due to lower premiums “resulting from stabilization of the individual market.”

How are they going to do it? Price controls! Under the plan, the State of Colorado requires health insurance carriers to reduce premiums on Colorado Public Option plans for individuals, families, and small businesses by 15 percent between now and 2025. 

The Reality: The Public Option Won’t Work!

Will it work as advertised? Almost certainly not. 

First, government is notoriously bad at projections of this type. We remember when President Obama repeatedly promised that the Affordable Care Act would reduce family health insurance premiums by $2,500 a year.

That wasn’t true by a long shot.

Second, artificial government intervention in price mechanisms has a long track record of catastrophic failure dating back to the ancient world. But you don’t have to be a history scholar to perceive the failure of Nixon’s Wage and Price Freeze, gas price controls in the 1970s, rent control policies in cities across America, and the spectacular collapse in Venezuela.

Lessons from Washington State

Washington is already experiencing serious problems rolling out its own version of a public option: After two years, Washington’s “Cascade Select” plan covers only 25 out of 39 counties.

The plan aims to deliver lower premiums primarily by limiting payments to providers. They just won’t pay the going rate. And large numbers of hospitals decided not to play.

The Washington public option based its reimbursement rates on Medicare rates – which are a net money loser for all but the lower-end providers and Medicaid-style clinics. 

An analysis by the Common Sense Institute found that the Colorado public option would likely reduce payments for health care services by $1 billion by 2024 and destroy 3,900 to 4900 health care jobs – including those of physicians, nurses, and other direct care professionals.

Government programs never destroy admin overhead jobs.

And some areas are already dealing with a shortage of health care staff. 

Actual Care Providers Want Nothing to Do With the Colorado Public Option

Rural hospitals, especially, saw that the low reimbursements from the government plan would destroy their profit margins, and have thus far, opted out. So have larger hospital systems and providers in higher priced markets.

Naturally, public option advocates blame the hospitals: It’s never the fault of the people creating the policies, is it? It’s always the people at fault.

“The plans had a hard time getting networks put together because the hospitals wouldn’t play,” said state Rep. Eileen Cody, the Washington legislator who introduced the public-option bill in 2019. “They’re a big part of the problem.”

Hoarders! Saboteurs! Kulak wreckers!

Colorado planners are anticipating that hospitals will be similarly reticent about accepting the public option, for the same reasons. 

And their solution is the same as Washington’s: 

Coercion! 

Like the Washington plan, the Colorado plan makes hospitals an offer they can’t refuse: If enough hospitals don’t participate by a certain date, state regulators will simply make it mandatory. Washington has already set a 2023 deadline for providers to comply. Colorado has written a provision to do so into its plan. 

Next, the new law authorizing the Colorado Public Option directs the private health care sector to reduce average insurance premiums in the individual and small-group markets by 20% below 2021 levels within two years.

Nevermind the effects of inflation, population growth, emerging technologies, and other factors that legitimately affect health care pricing in any economy: If providers don’t comply with the central planners’ pricing fiat, their masters in the Colorado Public Option Authority will shut them down by force.

Furthermore, the Colorado Public Option also forces all insurers that offer ACA-qualified plans in any county to sell the public option right alongside their own.

If a provider or doctor can’t afford to take on patients at unrealistically low reimbursement levels or doesn’t want to be forced to compromise the quality of care for existing patients, Colorado regulators threaten to impose fines or revoke licenses to shut them down completely.

For providers, the public option really isn’t an “option” at all. 

Providers Heading for the Exits

The central planning committees are already driving companies out of the state: Oscar Health announced it was pulling out of Colorado in May, citing Colorado’s regulatory environment.

Central economic planning always results in inefficiency.

Price controls always result in shortages.

The idea that government can simultaneously impose new regulations on providers, reduce payments to health care providers by $1 billion, and destroy 3,900 to 4,900 healthcare jobs without causing shortages is delusional, at best.

At worst, it’s a cynical attempt to undercut private medical plans, eliminate consumer choice, and impose the progressive dream of a centrally-planned single-payer system. And put patients and practitioners under the thumb of bureaucrats. 

ColoHealth was founded on the principles of economic liberty and in the belief in free and open markets with transparency and without coercion as the best mechanism for ensuring human prosperity and freedom.

This Colorado Public Option and the Authority directing it are in direct opposition to these principles. 

The Colorado Public Option Government Healthcare Trap

Don’t fall into the government health care trap! Yes, you may see the Colorado Public Option show lower premiums. But those low premiums come at a cost all their own – some visible and some invisible.

Once the price controls take hold, you will see your health care options begin to vanish.

You won’t be admitted to many of the best or most convenient hospitals and clinics, or you’ll have to pay cash out of pocket.

You will have to deal with longer waiting lists as fewer doctors will want to deal with Colorado Public Option patients.

You won’t even be told of some treatment options available to others, because doctors won’t do procedures that are not profitable for them.

Doctors will spend less time with you, since their clinics will have to take on a massive patient load to survive.

You’ll be herded more and more into the Medicaid model of treatment: Mass numbers of patients, long waiting lists, large waiting rooms, and only a few minutes with your doctor at each appointment.

Instead, stick with your principles, and stick with the free market, and economic liberty.

What to do now

Open enrollment for ACA-qualified plans starts November 1st.

Contact us today, and make an appointment with a Personal Benefits Manager. We’ll make it easy for you to go through all your options, including:

• Non-ACA health insurance plans without subsidies
• non-insurance alternatives like health sharing ministry organizations
• Subscription-based direct primary care plans
• High-deductible health plans, coupled with health savings accounts

All of our options leverage the benefits of the free market. Let us help you ensure you get the best value for your money.

We hope you don’t have a health care emergency requiring you to see a doctor or go to the hospital any time soon.

But it will happen to some of you. When the time comes, you’ll want to have all your options available to you, and you’ll want to be able to seek the best possible care.