The proposed new Colorado health insurance option could end up saving some customers more than expected and bring in more uninsured people than initially projected — assuming the federal government agrees to pitch in its savings.
An outline released last week by the Polis administration laid out how a proposed insurance plan would save money by reducing payments to hospitals. An actuarial report on the proposal estimated it would lower premiums overall by about 12% compared to projected rates for 2022. Savings vary by region, from 7% in Colorado Springs to 20% in Fort Collins.
The state plan also is projected to bring about 18,000 uninsured people into the market. If that’s correct, it would reduce the number of Colorado residents without insurance by about 5%.
That scenario relies on the Centers for Medicare and Medicaid Services agreeing to redirect about $42 million it would have otherwise spent subsidizing low- and middle-income insurance buyers toward the state’s new plan. The feds have often agreed to do that for programs like reinsurance (giving insurance companies a backstop), but it’s not clear how they’ll view Colorado’s new proposal. (The state hasn’t submitted a waiver request yet.)
Estimates released in November had come up with about 11% in premium savings, and no more than 9,200 potential customers.
The new plan grew out of a bill last year ordering state agencies to investigate offering a “public option,” which most people take to mean a government-run plan. Instead, the agencies proposed a privately run insurance plan subject to some additional regulations meant to reduce costs.
Below are some questions and answers on the new plan. Everything is subject to change once a bill is introduced and the General Assembly starts debating, though, and there’s some uncertainty inherent when trying to predict how people will react to policy changes.
How does this affect me?
If you buy your health insurance on the individual market and decide to purchase one of the new plans, you could save some money on your monthly premiums. The report estimated the average insurance buyer could save about $280 on premiums annually. Be sure to shop around, though, because tax credits to buy insurance are likely to drop and you may end paying more to keep your current plan.
Where you live will influence how much you might save, with monthly premiums expected to be about $120 lower in Grand Junction, but only $37 lower in Colorado Springs. In Denver, the report projects monthly savings of about $53.
If you earn between two and four times the poverty line ($51,500 to $103,000 for a family of four), you could also save some on out-of-pocket costs, like your deductible and the co-pays you make when you see your doctor. About one-quarter of people on the individual market fall in that income bracket, and they could save an additional $376 on average.
If you’re insured by Medicare, Medicaid or another government program, this doesn’t affect you. If you have private insurance through your job, it’s a little murkier. The Colorado Hospital Association has said your local hospitals might need to ask insurance companies for more money to cover what they’re not going to get from the state plans, and those costs would most likely be passed on to you. State officials dispute that hospitals will need to shift costs and say their rates will cover the cost of caring for patients, plus some profit.
Ultimately, hospital and insurance company negotiations typically come down to bargaining power. If a hospital is the only one in your area, or offers services that patients can’t get elsewhere, that facility can demand more from your insurance company regardless of what the state does.
What kind of insurance is this?
It has to offer the same essential benefits as all individual market plans, like paying for hospital, mental health and maternity care. Plans would offer a different cost structure — for example, higher monthly premiums and lower out-of-pocket costs if you get sick, or vice versa.
Where is this federal money coming from and how would it be used?
The federal government pays tax credits to make insurance more affordable for people earning less than four times the poverty line who buy on the individual market. The amount of the tax credits is pegged to the cost of the second-cheapest silver (mid-level) plan for sale in each area. So if cheaper plans come onto the market, the amount of the tax credits goes down, and the feds save money.
The actuarial report estimates the federal government would save about $42.7 million if the state option goes through. That’s lower than the initial estimated savings, because more people are expected to come into the market as prices drop.
If the Centers for Medicare and Medicaid Services approves, Colorado would use most of the money to reduce premiums, with some going toward reducing out-of-pocket costs for some people who don’t currently get cost-sharing reduction help.
How much would my local hospital lose?
Data about individual hospitals hasn’t been released yet, but statewide, the average hospital would receive about 168% of what Medicare pays, compared to the roughly 280% they receive now.
For example, say Medicare pays your hospital $100 to give you a screening test. Right now, private insurers pay an average of $280 for that test. Under the proposal, state option plans would pay $168.
Individual hospitals could receive anywhere from 155% to 218% — $155 to $218 in our example — depending on whether they are part of a large hospital system, operating a small facility in a rural area, have kept their costs low and serve lots of patients covered by Medicare or Medicaid.
The actuarial report did include regional estimates. The biggest drop would probably be in the Fort Collins area, where hospitals are now earning 369% of the Medicare rate, but would get an estimated 161% under the state plans. The smallest change would be in the Pueblo area, where average rates would drop from 261% of Medicare to 196%.
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