Health insurance representatives detailed the status and implications of the Colorado Option as it enters its second year of operation in the state.
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The Colorado Option was approved by the legislature in 2021. It is available to all Coloradans who buy their health insurance on the individual market, and small employers with less than 100 employees. Colorado Division of Insurance (DOI) Chief Deputy Commissioner Kate Harris said it was designed to improve access and affordability at the 2023 Colorado State of Reform Health Policy Conference earlier this month.
“It’s a standard plan that all carriers are required to offer,” Harris said. “It lowers premiums. We took the 2021 benchmark premium for plans and required carriers to lower that (by) five percent in 2023, by 10 percent in 2024, and by 15 percent in 2025.”
DOI will enforce premium reductions through rate reviews and a new public hearing process.
“The other thing the option does is lower costs for many services. We hear from folks that, even if they’re insured, they don’t have the ability to use their insurance because they’re fearful about their copay, their co-insurance, and their deductibles. So we said we were going to take some of these services that we know are so critical, and put them before the deductibles. So people can start to use their coverage without fear that they might not be able to afford the service.”
One in five Coloradans skipped healthcare due to concerns about cost in 2021, and three percent of Coloradans said their health worsened because they couldn’t afford their medications, according to a Colorado Health Institute survey.
As part of the Colorado Option, DOI designed a standardized plan that allows consumers and businesses to easily compare plans and choose the one that is right for them. Plans cover all essential health benefits required by the Affordable Care Act, provide free primary care and mental health visits, and are designed to reduce racial health disparities and improve health equity.
“This is to give folks the ability to compare more easily,” Harris said. “We do a lot of focus group work with consumers. And what we hear is that insurance is so confusing.”
The Colorado Option saw more than 35,000 people (13 percent of the total marketplace enrollment) enroll in its first year. Harris compared that to the one percent enrollment Washington’s public option plan garnered in its first year of operation (which was partly due to the automatic reenrollment of the majority of returning enrollees in their plan from the previous year).
In August, DOI received $245 million in federal funding for its Colorado Option and Colorado Reinsurance Program, Harris noted.
“That is a direct reflection of the savings from those premium reductions. The federal government agreed that we were saving money through those reductions, and gave that money back. It goes directly into our programs. It reduces copays and deductibles for people enrolled in the exchange. Due to that funding, there will be an additional 1,000 people this year that are insured because of the federal savings we are receiving.”
Health Management Associates Principal Stephanie Denning noted that the average annual single premium and the average annual family premium each increased by seven percent over the last year.
“They’re expected, in some cases, to double and triple next year,” Denning said. “What is the point at which that benefit package needs to change in order to keep the plans sustainable?”
Colorado Association of Health Plans Executive Director Saskia Young said cost-reduction constraints and other characteristics included in the Colorado Option legislation have already made the initiative unsustainable. Inflation is another inhibitor, she said.
“This year’s rates have not been finalized, but I’d like to highlight the fact that the Colorado Option has failed to deliver on its promise to save people money on healthcare. As of Jan. 1st, 85 percent of plans in the individual market did not meet the five percent reduction goals. For many Coloradans, the mandated benefits in the Colorado Option maybe don’t represent the most value for where they are in their time of life and their specific needs. The best value for them is to turn to other high-quality, potentially less expensive non-Colorado Option plans that are offered on the exchange.”
The Colorado Option requires carriers to offer the standardized public option plan with premiums that are 10 percent and 15 percent lower than their average 2021 premium rate for 2024 and 2025 plans, respectively. But of the 13 carriers offering Colorado Option plans, only Denver Health Medical Plan had met all of the state’s rate reduction targets for 2024.
Harris said the idea that Colorado Option plans are more expensive isn’t accurate.
“Carriers in 2023 broke down their non-Colorado Option plans to compete with the Colorado Option,” Harris said. “That’s why we saw some of those premiums being close to each other. Which we’re happy to see; that’s driving competition in the market. That’s driving costs down for the consumer.”
Tim Hebert—health insurance broker and legislative chair/president-elect at Sage Benefit Advisors—was asked to discuss Colorado Option feedback he has heard from clients.
“We’re probably going to hear that in November or December as we go to open enrollment,” Hebert said. “Right now, we’ve heard a little bit, but not a lot. Consumers have very short memories. They get very excited about enrolling in a plan with great coverage at a low price. And the carrier leaves, and they’re like, ‘I can’t believe you put me in a plan that wasn’t stable.’ So they have a short memory about what the plan is. It’s all over the board. We hear that consistently. Everyone’s needs are different.”