New Report Finds The State Government Option Is ‘Still On A Collision Course’

May 14, 2021

DENVER – The Common Sense Institute (CSI) released a new report this week, providing critical analysis around the negative consequences and unaffordable costs of the amended version of House Bill 21-1232 – which would create a new state government-controlled health insurance system, also known as the state government option. This report comes after bill sponsors and proponents failed to provide recent health care data as they continue to push through their misguided proposal based on outdated data without consideration of the COVID-19 pandemic or successful legislation and federal efforts that have already reduced costs and expanded health care for Coloradans.

The report finds the “restrictive premium growth rate caps and low medical provider reimbursement rates” in the latest version of the bill would “force medical providers to cut spending in a way that negatively impacts access and quality, or it will force them to increase the cost shifting that already occurs in health care thereby increasing prices for commercial payers.”

The report explains that the proposed growth caps on premiums of 2.9 percent are well below the projected growth of medical costs and much lower than the 10-year historical average individual market premium growth of 7.6 percent, which does not reflect actual annual medical cost trends.

“The challenges for carriers will arise when the allowable annual growth rate in premiums does not reflect actual medical trends … over the long run, more and more carriers will face challenges hitting the required premium levels,” states the report.

Colorado Politics reports“That translates to being unlikely that insurance carriers will be able to meet the 18 percent target over three years before the state steps in to issue fines or dictate medical reimbursement rates that the Colorado option plan pays to medical providers.”

“The basic hospital reimbursement rate, 155 percent of Medicare, is 97 percentage points lower than the latest national average reimbursement rate published by RAND … The highest a base reimbursement rate under this rate schedule, 210 percent of Medicare, applies to pediatric hospitals; this value is still lower than all but four states’ averages,” the report finds.

The report warns, “Hospitals, especially rural hospitals, and ones that provide services which may fall short of their regions’ network adequacy requirements, would stand to lose hundreds of millions of dollars in revenue under the bill’s rates. Some could be subject to contraction or closure.”

The report concludes, “This means that Colorado hospitals, especially those which are already vulnerable, would stand to lose huge amounts of revenue as a result of this bill.”

  • To read the full Common Sense Institute report titled “The Revamped Public Option Bill,” CLICK HERE.