“Colorado Option” health insurance bill aims to bring cheaper premiums to areas with few choices on marketplace

Only one state in the U.S. — Washington — has a public option health insurance plan. Democrats think they could make Colorado the second. They’re reviving the issue in the Colorado Legislature for another year of debate on a bill that, this time, makes some concessions to the health care industry.

A draft of the legislation circulated Tuesday. Bill sponsor Rep. Dylan Roberts, an Avon Democrat, said there isn’t a specific timeline for when it’ll be officially introduced, but said he expects “robust conversations over the coming weeks and changes to be made prior to introduction.”

In 2019, lawmakers directed the state to recommend a public health insurance plan. Last year, lawmakers tried to pass the plan, but had to shelve it because of COVID-19. Roberts has said this year’s bill takes the effects of the pandemic into account by giving the industry time to recover from COVID and reduce costs on its own.

At the core of this new bill is the creation of a standard insurance plan that insurance companies could choose to offer through the Connect for Health Colorado marketplace for individuals. If a zip code doesn’t have at least two insurance companies offering the standard plan that the bill would create, or if those insurers don’t meet targets for reducing monthly premiums, the state could step in and sell the “Colorado Option Health Benefit Plan” itself in 2025 to individual and small group markets.

The authority would only offer individual plans at first — and about 8% of Coloradans buy their insurance through the individual marketplace. And since rural areas tend to have fewer people and fewer insurance options than urban ones, it’s possible the newly created Colorado Option Authority could work in less-populated counties that also tend to have more expensive insurance.

“Nobody’s forced to buy it,” Roberts said. “It’s only a choice. You don’t have to leave your current insurance to buy it.”

The goal is to provide an affordable option for people who are uninsured or buying their own insurance on the marketplace, he said, and brings all players in the health care industry to the table to figure out how to make costs more affordable.

The bill sets a goal of reducing monthly premiums in each zip code by 10% in 2023, compared to what people in the same area paid for insurance in 2021. The savings goal would rise another 10% in 2024. If insurance companies offered the new standardized plan, but didn’t meet those savings goals, the state authority could step in.

The bill doesn’t specify how insurance companies would need to meet those savings goals, though. It also leaves most decisions about what the plan would cover, and how much it would pay providers, up to the Colorado Department of Health Care Policy and Financing, which also runs the state’s Medicaid program.

“It’s really not as big of a deal as the opposition wants to make people think it is,” Roberts said. “We’re trying to help a specific group of people who face unaffordable costs while not disrupting everyone else.”

Like last year, the bill instructs the state to apply for a “waiver” from the federal government, and for some of the money it expects to save with a public option. Essentially, the state will argue that the new plan will save the federal government money, because it won’t pay as much in tax credits when people buy less-expensive insurance through the marketplace.

If the federal government says no, Roberts said the state would need to explore other funding options if, in the end, Colorado needs to implement the insurance plan.

“But we hope that the industries do as they said they could and meet the targets in the bill to provide an affordable quality health plan in every region of the state without additional financial needs from the state or federal government,” he said.

There are major changes to the bill this year in hopes of it passing, including getting rid of explicitly seeking to lower reimbursement rates paid to hospitals. Last year, unsurprisingly, the Colorado Hospital Association opposed that part, arguing it would be expensive and possibly run smaller places out of business.

Another difference is that last year’s bill required insurers to offer a newly created plan. This year’s version allows them to not participate, which might blunt opposition from the insurance industry. They would still face competition from the state authority if they chose not to sell the newly created plan, though.

Still, the bill likely will face significant opposition. Last year, national groups spent thousands of dollars on ads opposing the bill before any specifics were introduced, and some of the same groups are pouring money into ads again this year.

Industry leaders have been working with sponsors on this year’s bill. But Katherine Mulready, chief strategy office and senior vice president of the Colorado Hospital Association, said the group is still sorting through the specifics and it’s too soon to tell what path the bill will end up taking.

“I think there are components of this bill that are more promising than last year’s approach, most of which is the market-based approach, in the initial phase,” she said.

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