Anticipating a State Option For Health Care: Will Businesses Face Higher Costs Or Will Quality and Access be Cut?

EXECUTIVE SUMMARY

Colorado Governor Jared Polis and his policy advisers are contemplating a major new intervention in the state’s health insurance and health care markets. In partnership with legislative leaders, the Polis administration is developing a so-called state option: a new type of insurance plan that would significantly expand the role of state government within Colorado’s health care industry.

To date, a state option has never been fully implemented at a state or national level before and, under the current timeline, legislation to create a state option in Colorado could be introduced and passed early next year. In this report, the REMI Partnership explores the potential impacts of a state option to Colorado’s health care system and the broader economy. Given the potential impacts, the goal is to help policymakers and stakeholders make informed and timely decisions about recently passed legislation, HB19-1004, and the resulting pending proposal from the state.

Most concerned parties share an objective to make health care coverage more affordable, however, proposals to restructure the financing and delivery of health care, especially those which would expand public health coverage that does not pay for the full costs of care, should be carefully scrutinized. Although well-intentioned, such provisions may cause more harm than good.

After studying the potential impacts of the state option in Colorado, the results of economic modeling indicate;

• Government price controls that are needed to facilitate below-market premiums offered by a state option likely do not cover the full costs of care, and therefore the reduced reimbursements to health care providers could range from $494 million up to $1.4 billion.
• The state option could cause a potential loss of 1,500 to 4,500 health care workers across Colorado, exacerbating the state’s existing shortage of primary care physicians, nurses, and other health care providers.
• If lost revenues from the state option are shifted to employer-provided insurance plans and other private sources, the state economy could lose between 2,900 and 8,320 jobs and $320 million to $919 million in total GDP, as a result of a more than 5% increase in the cost of health care for businesses.
• An 80% to 100% membership loss could occur in the state’s individual health insurance market as people drop private coverage in favor of the state option’s below-market premiums.
• A reduction of 2.7% to 8.3% could occur in the employer-provided insurance market, which is the biggest source of health coverage for Coloradans in the state.