By Christine Monahan, Nadia Stovicek, and Sabrina Corlette*
Colorado is likely one of the first states within the nation to implement a quasi-public medical insurance choice, requiring personal well being insurers to supply “Colorado Choice” plans that meet heightened necessities to offer residents extra reasonably priced, high-quality medical insurance plan decisions. Colorado typically has excessive industrial hospital charges—on common 283% increased than Medicare charges—spurring motion to cut back prices for customers. The state legislature enacted this program to drive down medical insurance premium progress within the particular person and small group markets by encouraging insurers to cut back well being care supplier reimbursement charges and undertake different value containment measures.
For 2023, Colorado required insurers to cut back premiums for Colorado Choice plans by 5 p.c (relative to premiums in the identical space in 2021 topic to inflation and different changes). For every of the subsequent two years, they need to lower premiums by an extra 5 p.c. Premium will increase thereafter are capped to medical inflation. The regulation additionally requires insurers to fulfill wholesome equity-focused community necessities. In its first 12 months, six insurers supplied 36 Colorado Choice plans within the particular person market, representing 11% of plans; 11 insurers supplied 48 Colorado Choice plans within the small-group market, or about 10% of accessible plans. Whereas few of those insurers met their targets through the first 12 months, in addition they didn’t face any penalty for noncompliance.
Starting with plan 12 months 2024, the Colorado Division of Insurance coverage (DOI) is bringing extra scrutiny to Colorado Choice premiums and underlying supplier reimbursement charges and might impose decrease reimbursement ranges to attain this system’s premium discount aim. This weblog examines how that course of is unfolding.
Enhanced Price Evaluate Below the Colorado Choice Program
When Colorado policymakers first started creating a public choice, they envisioned the state would set the charges Colorado Choice plans would pay well being care suppliers, however business teams argued that they may decrease prices for customers on their very own. Lawmakers finally compromised: personal insurers and suppliers may nonetheless negotiate charges themselves, however the state would have considerably extra oversight authority.
Particularly, well being insurers should notify the DOI whether or not their Colorado Choice plans meet premium charge discount targets every year. If not, the insurers should clarify why and, if relevant, determine any hospital or different well being care supplier that could be a trigger for his or her failure to fulfill the targets and identify them in a criticism. The DOI additionally could file a criticism towards an insurer that fails to fulfill its targets and usher in any suppliers it determines chargeable for that insurers’ failure to conform. The DOI Commissioner could then maintain a public listening to with each the insurers and suppliers at which the insurers can testify about why particular hospitals prevented them from decreasing reimbursement charges, thus limiting their capacity to decrease premiums.
On the conclusion of the listening to, the Commissioner could set new reimbursement charges that the suppliers should settle for and the insurer should use to recalculate premiums. For hospitals, these Commissioner-set reimbursement charges could also be no decrease than both an annual ground calculated by the DOI or greater than 20 p.c decrease than the insurer-negotiated charge from the earlier plan 12 months.
Below a newly enacted regulation, the DOI can also set up uniform limits on insurers’ administrative prices and earnings for Colorado Choice plans; the brand new caps can be 15 p.c for administrative prices and a couple of p.c for earnings for plan 12 months 2024.
The Preliminary Price Notifications and Complaints
Regardless of insurer and hospital assurances that they may carry down prices on their very own, just one insurer initially met the premium charge discount targets statewide for 2024. Two others notified the DOI that they’d meet the targets for only a handful of their plans, whereas the bulk wouldn’t meet the targets for any plans. Surprisingly, just one insurer, Cigna, named any suppliers as chargeable for the persevering with excessive premiums in a criticism. The rest forged aspersions on this system and laid blame for rising charges on components outdoors of their management, together with inflation. (Recognizing that inflation has been increased than anticipated after they first enacted the regulation, lawmakers have revised how one can account for inflation when calculating the premium discount targets.)
After conducting its personal analyses, the DOI filed complaints towards a number of of the state’s larger insurers and the hospitals it discovered had been preserving these insurers’ premium charges above goal. When naming these insurers, the DOI prioritized insurers providing Colorado Choice plans with the very best anticipated enrollment. When naming hospitals, the DOI recognized hospitals whose reimbursement charges had a cloth impression on premiums and that might generate the best potential premium reductions for the named insurer if the Commissioner had been to get them organized to just accept the relevant annual hospital reimbursement ground decided by the DOI. (The DOI didn’t account for the regulation’s provision that reimbursement charges couldn’t be decreased by greater than 20 p.c in comparison with 2023.)
The complaints filed by Cigna and the DOI kickstarted a public listening to course of into the named insurers’ charges and named hospitals’ reimbursement ranges and triggered a flurry of authorized filings from all events.
The Public Listening to Course of
The general public listening to course of didn’t proceed as deliberate, however nonetheless seems to have yielded outcomes. Most notably, earlier than the hearings started, Cigna introduced that it had reached an settlement with the three hospital techniques it named to decrease reimbursement charges. One hospital even agreed to charges under the ground the Commissioner may have ordered. Upon verifying the brand new charges, the Commissioner cancelled Cigna’s listening to.
The Commissioner additionally cancelled the opposite hearings after the insurers and hospitals demonstrated that the aims of the listening to—lowering the supplier reimbursement charges—had been achieved. Particularly, the insurers (Rocky Mountain HMO, Kaiser Basis Well being Plan, and HMO Colorado) attested they agreed to supplier reimbursement charges that had been as little as the Commissioner may have ordered had the hearings proceeded. The Commissioner, in flip, vacated the hearings, however ordered that the insurers present documentation to the DOI as a part of the speed evaluation course of verifying their representations, together with (1) plan 12 months 2023 and 2024 charge data, together with contracts and charge sheets and documentation exhibiting the negotiated charge as a proportion of Medicare; and (2) a press release demonstrating the general impression of the supplier reimbursement reductions on premiums. As a result of it’s unclear when the insurers and hospitals reached their agreements, this data should distinguish between agreements made earlier than and after March 1, 2023, when insurers made their preliminary charge notifications. The DOI should use this data to calculate the premium charge discount ensuing from suppliers and insurers reaching the utmost allowable reimbursement charge reductions.
Whereas the method didn’t happen as initially supposed, DOI nonetheless led a public listening to to permit the general public to testify typically and about particular insurers. Shopper advocacy teams Colorado Heart for Regulation and Coverage and the Colorado Shopper Well being Initiative praised the general public listening to course of to maintain insurers accountable. Small enterprise teams testified in help of the Colorado Choice program and wished it to be extra extensively out there and simpler to entry within the state. One particular person testified towards this system.
What Comes Subsequent
The Colorado DOI is continuous its evaluation of Colorado Choice plan charges, each to make sure the ultimate premiums for 2024 meet all expectations beneath the regulation and to guage the premium impression of the discount within the negotiated reimbursement charges and the general public listening to course of. At a minimal, nonetheless, we all know that the method generated financial savings for customers who can be enrolling in Cigna’s Colorado Choice plan and requested charge will increase for Colorado Choice plans are greater than 30% decrease than the requested charge enhance for non-Colorado Choice plans. Moreover, the U.S. Division of Well being and Human Providers has calculated that the Colorado Choice program along side the state’s reinsurance program is anticipated to cut back common premiums by 22% in 2024, up from 20% when the reinsurance program alone was launched in 2020.
Though generally mentioned for instance of a state public medical insurance choice, the Colorado Choice program serves for instance of how states can improve their charge evaluation processes to decrease well being care prices and enhance affordability. Keep tuned for extra from CHIR quickly on how further states have and are exploring utilizing enhanced charge evaluation powers to include prices.
*Authors’ observe: This weblog was up to date on the afternoon of Monday, September 11, to right the order of the authors.