The number of enrollees was far short of the number plan advocates predicted, and far short of the number needed to make the plan viable.
What is the “Colorado Option?”
The Colorado Option is a publicly mandated lower-cost health insurance program available to all Coloradans who buy their health insurance on the individual market (i.e. not from an employer) and to small employers with fewer than 100 employees.
Under the state’s rules, health insurance plans participating in the Colorado Option are required to lower premiums on Colorado Option plans by at least 15% by 2025.
The legislature-approved scheme also requires the Colorado Insurance Commission to enforce the premium reduction requirement by sanction, if necessary.
Additionally, the public option relies on private healthcare providers to accept below-market-rate reimbursements. In some cases, the reimbursements are so unrealistically low that if the public option gains traction, these providers would be forced to shut down altogether.
So, key healthcare providers – including hospitals and clinics in rural areas with few other options and that are critical to the plans’s viability, are refusing to participate.
This isn’t a surprise to us: The signs were there from the beginning.
Physicians, hospitals, business owners, and other groups strongly opposed the plan.
The Problems With the Colorado Option
Doctors noted that the public option would reduce wages for specialties that are already experiencing shortages, as the state would become less attractive to physicians looking to set up a private practice. The plan would also worsen shortages by driving doctors out of the state, and cram down wages for other practitioners as well.
Hospital administrators warned that it would be hospitals who would shoulder most of the cost of the bill.
Business groups warned that the public option would cannibalize good private plans, shut down supporting businesses, and lead to fewer choices and less competition. All these objections were raised before the plan passed and was signed into law in 2021.
Naturally, the central planning bureaucrats who believe they can control such a vast and complex industry by setting prices by fiat are blaming providers, rather than themselves.
So what politicians and bureaucrats could not accomplish through appropriately designing incentives and letting markets set prices, they now intend to accomplish through coercion.
If hospitals and providers won’t accept the reduced reimbursement rates freely, they simply plan to force them to.
Are the Wheels Falling Off the Colorado Option?
Under Colorado’s law, all health insurers offering individual and small group plans must offer at least one plan under the public option.
These plans are required by law to lower premiums by 5 percent per year for three years, allowing for inflation.
At the same time, these plans are also required to somehow roll out improved benefits for plan members, including lower out-of-pocket costs by using co-pays instead of highly variable and unpredictable co-insurance charges.
All while using a provider network that meets vague and amorphous requirements for “cultural responsiveness.”
It’s a nearly impossible combination. If it were that easy to do, plans would be doing it already – without the need for government compulsion.
So when we entered 2023, most public option plans were unable to meet the ambitious targets set by politicians and bureaucrats in the state capital.
COLORADO HEALTH INSURANCE
Colorado Insurance Premiums Actually Went Up, Not Down
BrightHealth, a prominent insurer in the Colorado market, pulled out of the state entirely, leaving tens of thousands of Coloradans scrambling to find a new insurance carrier.
The public option rollout seemed to be little or no help at limiting the inexorably rising cost of health insurance in Colorado: Rates increased by 10.4% for Coloradans who buy their health insurance on the state’s exchange rather than through an employer.
Rates for small employers actually increased by 7.4%.
Rural and Western Slope Colorado residents were hardest hit.
Legislators Desperately Looking for a Fix to the Colorado Option
Of course, like all attempts at government central economic planning via price controls, the system needs “fixing.” It will always need “fixing” as long as state bureaucrats and politicians think they can control prices and supply.
And so the Colorado legislature is already trying to fix it.
House Bill 23-1224 would standardize the way plans display pricing information, ostensibly making it easier for consumers to comparison shop.
In theory, this could be a good idea: more transparency is always better. But consumers need to be aware that a low premium isn’t the only factor in choosing a health plan. Any good reform would balance the visibility of price information against the value built into the plan.
The next bill winding its way through the legislature, House Bill 23-1225, empowers the state to set price caps for any medications they deem to be “unaffordable” for Colorado residents.
Under current law, regulators are only allowed to set price caps on a dozen specific medications. But HB 23-1225 expands the review board’s authority to control the maximum prices of all drugs.
Price Controls Don’t Work
Government price caps are always a bad idea, as they do nothing but direct limited supplies elsewhere. They have an unbroken track record of failure. Bureaucrats are not that smart. If a drug is expensive, that is a reliable indicator that it is in short supply. If doses are limited, they will go to someone in another state who will pay the market price – exacerbating shortages here in Colorado. This will continue until supply catches up with demand.
Price caps also inhibit investment in the development of new drugs,too, which robs future generations of their ability to access the best possible health care and technology.
What To Do Now With the Colorado Option
Meanwhile, our recommended course of action remains the same:
- Don’t choose a health plan based on premiums alone, but based on the overall level of financial protection it provides to your family against the risk of high medical bills for an unexpected illness or injury.
- Consider an HSA-qualified high deductible health plans (HDHPs), which will allow you to make tax-deferred contributions to a health savings account, and ultimately pay your medical bills with tax-free dollars – a huge money-saver, in the long run.
Click here to learn more about opening up and using an HSA in Colorado.
- Be open to cost-saving alternatives to traditional insurance solutions, such as healthsharing plans. These non-profit programs – sometimes called medical cost-sharing plans – are typically available for 30 to 50 percent less than the cost of an unsubsidized ACA-qualified traditional health insurance policy.
- Consider Direct Primary Care (DPC), an innovative non-insurance health care delivery model. Here’s how it works: you pay a predictable and affordable monthly subscription (usually $70 to $100 per person) to your primary care doctor. In return, you get unlimited visits, as often as you want or need.
Membership in a DPC practice a cost-effective and efficient way to receive primary care services such as preventative care, routine checkups, exams, and screenings, medication management and updates, immunizations, and other services.
Most of our clients who have a DPC membership pair that with a low-cost catastrophic health sharing program, to protect from unexpected expenses at the emergency room or hospital, or with a specialist.
With the average out-of-pocket cost of seeing a primary care physician running over $160 per visit, DPC is a great option for anyone who usually needs to see their doctor more than once a month.
(As a bonus, patients report much greater satisfaction with their DPC. DPC doctors tend to spend much more time per patient, and offer much more personalized care.) Click here for more information on Direct Primary Care plans in Colorado.
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Misty Berryman is a Personal Benefits Manager at ColoHealth. Her aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Misty on her Bio page.