New Analysis: Colorado Option Increasing Consumer Costs, Reducing Competition, Will Continue to Drive Provider Shortages

Apr 11, 2023

DENVER – As Denver politicians continue to ignore the mounting failures of the Colorado Option, a new analysis released today by NovaRest, an independent actuarial consulting firm with extensive experience supporting state and federal insurance regulators, highlights how this unaffordable, new state government-controlled health insurance system has fallen short of the promise to save Coloradans money on their health care.

The actuarial analysis, commissioned by Partnership for America’s Health Care Future Action, builds on a previous analysis of the Colorado Option and outlines how this government-controlled system is increasing costs and reducing competition in the state’s health insurance market while driving health care provider shortages.

Key findings include:

  • In plan year 2023, the Colorado Option is NOT the lowest premium plan for consumers in most counties.
  • Consumers in most Colorado counties will save more premium dollars by selecting a non-Colorado Option plan, despite the premium reduction targets and non-benefit expense limitations applied to the Colorado Option plans.
  • For the 2023 plan year in the individual market, non-Colorado Option Plans are the lowest cost on-exchange plan in 60 of 64 counties for the bronze tier, 54 of 64 counties for the important silver tier, and 32 of 64 counties for the gold tier. In 2021 (the most recent full year reported), silver and bronze tier plans represented 89% of individual market enrollment.
  • The target premium reductions appear to be unrealistic. 85% of Colorado Option Plans offered in the individual market did not meet the 5% premium reduction target. Considering this year’s results, it is unlikely that the more aggressive premium reduction targets will be met in future years. Recent health insurance issuer filings confirm the outlook that very few Colorado Option plans will achieve the 10% premium reduction for 2024 offerings.
  • One small regional health insurance carrier (Denver Health Medical Plan) was the only issuer to meet the Colorado Option premium reduction requirement for all of its plans. However, it did so by pricing their Colorado Option plans at an unsustainable loss according to their own actuaries. 
  • Denver Health Medical Plan’s actuary indicated in their 2023 premium rate filings that, “…by pricing certain plans at a loss, Denver Health Medical Plan is exposed to the risk that premiums will be inadequate if actual enrollment in the Colorado Option plans (which is beyond Denver Health Medical Plan’s control and difficult to project due to 2023 being the first year of the program) is significantly higher than anticipated.”
  • The law requested health care providers to accept lower reimbursement rates which will continue to drive provider shortages. As of 2022, all Colorado counties except Pitkin, Summit, and Broomfield have primary care shortages. “We believe further pressure on provider fees will disincentivize providers from expanding the accessibility of care and may even impact the quality of care,” said Richard Cadwell of NovaRest.
  • In comparison to the 2022 benefit year, several carriers have exited both the individual and small group markets in 2023.
  • Two health insurance carriers exited the individual market (Bright Health and Oscar Health).
  • Three health insurance carriers have exited or are in the process of exiting the small group market (Friday Health, Oscar Health, and Humana).
  • Division of Insurance-enforced Colorado Option restrictions on carrier allowance for administrative costs and restrictions on total risk margins will make it more difficult for the Colorado market to attract new issuers to participate in the individual or small group Affordable Care Act (ACA) markets. Numerous health insurance issuers have cited concerns that DOI-enforced restrictions on health plan pricing do not provide for adequate rates or certainty regarding the viability of the market. This will continue the trend of reduced competition in the Colorado ACA markets.
  • By approving inadequate Colorado Option premium rates for carriers such as Denver Health Medical Plan, the Colorado Division of Insurance artificially lowered the premium tax credits available to many consumers. This is because a reduction in the ACA benchmark silver plan reduces the premium tax credit available to consumers. If consumers enrolled with another carrier want to retain their existing plan, they will be required to pay more for that plan given the reduction in the ACA premium tax credit.
  • Individuals or families in Adams, Arapahoe, Denver, or Jefferson counties making an income of 300% of the federal poverty level ($90,000 for a family of four) and wanting to purchase a health insurance plan with another carrier would pay $1,128 more in premium per year for a family with two adults age 40 and two children age 15.

The new study is the latest evidence that the Colorado Option is failing to live up to its promises. The study follows a report from the Colorado Sun which examined significant questions regarding the sustainability of the program.

Despite overwhelming proof of its flaws, proponents of the Colorado Option are aiming to give even more control to the Department of Insurance and further tip the scales in favor of this government-controlled health care system through HB23-1224. Instead of continuing down this path, policymakers should build on and improve on what’s already working in health care to expand access to affordable, high-quality health coverage and care.

Read NovaRest’s full actuarial analysis here.

Learn more about Colorado’s Health Care Future here.