State Public Option Implementation Update

State Public Option Implementation Update

Three states – Colorado, Nevada, and Washington – have enacted state public option programs. While public option plans in Washington and Colorado have been available since 2021 and 2023, respectively, Nevada is preparing to offer its public option in 2026. In this memo, we provide a status update on implementation activity in each state.

Colorado

In conjunction with implementation of the Colorado Option, Colorado seeks to understand the impact of premium rate reduction targets for carriers on the hospital workforce, which is a key hospital cost driver. Carriers are required to reduce premiums offered in plan year (PY) 2021 by 5 percent in PY 2023, 10 percent in PY 2024, and 15 percent in PY 2025. Earlier this year, Colorado released the 2023 Hospital Workforce Trends Report – the first of three annual analyses on the state’s hospital workforce as required by House Bill 21-1232. This report establishes the baseline on wages, benefits, staffing, training, and working conditions leading up to implementation of the Colorado Option.

Labor costs for workers employed directly by hospitals and contract workers are a major component of hospital’s operating expenses. In 2021, salaries, wages, and benefits of hospital workers represented 44.1 percent of Colorado hospitals costs and 42.5 percent of revenue derived from patient services. Increasing reliance on staffing agencies to address workforce shortages has put further pressure on total hospital costs. Between 2020 and 2021, contracted labor costs increased by 115 percent. During that same period, salaries, wages, and benefits for workers directly employed by employees rose by 8.4 percent.

Future reports will delve into the impact of the Colorado Option on the state’s hospital workforce, including the impact of the Insurance Commissioner’s increased authority starting in PY 2024 to require hospitals to accept state-established rates in order for carriers to meet premium reduction targets and enhanced network adequacy standards. The next report intends to gather input directly from employed and contracted workers to increase understanding of the interactions between workforce experiences, hospital costs, and the Colorado Option.

Additionally, the Colorado Division of Insurance received $245 million in pass-through funding for Colorado’s Reinsurance Program and the Colorado Option, authorized through a Section 1332 waiver. Federal funding will be used to lower premiums and out-of-pocket costs for Connect for Health Colorado and support the OmniSalud program, which provides financial assistance for health insurance to Coloradans without documentation (including DACA recipients). With the federal funding, the OmniSalud program will provide $0 premium health plans to 11,000 qualified individuals in 2024, a 10 percent increase from 2023.

Nevada

The Nevada Public Option will be available January 1, 2026 in the state’s individual market, Nevada Health Link. In preparation for the launch, the Nevada Department of Health and Human Services (DHHS) is seeking public comments on its Section 1332 waiver application, which must be submitted to the Centers for Medicare and Medicaid Services by January 1, 2024. The federal waiver would allow Nevada to implement the premium reduction targets and general federal pass-through funds to pay for the Nevada Public Option’s operational costs. Remaining funds could be used to improve consumer affordability.

In an effort to address concerns that the public option will destabilize Nevada’s individual market, Republican Governor Joe Lombardo announced in October 2023 his plan to “transform” the public option into a Market Stabilization Program. Governor Lombardo’s “new approach” does not structurally change the public option, as it is established by Nevada Senate Bill 420, and instead specifies how remaining federal pass-through funds from the Section 1332 waiver will be used to establish a three-part Market Stabilization Program:

• A new state reinsurance program for health insurance issuers operating in Nevada Health Link. The new program seeks to limit financial losses for health insurers, mitigate the risk of cost shifting by insurers due to premium reduction targets, and lower health care costs.

• A new annual quality incentive program for health insurance issuers offering the Nevada Public Option. Like the quality bonus payment program used in the State’s Medicaid managed care program, the new program would reward issuers that meet or achieve certain quality targets or other program goals. Governor Lombardo is particularly interested in new incentives to increase the use of value-based payment models.

• State loan repayment and full-ride scholarships for health care providers willing to work in Nevada for at least four years after training. Financial assistance could cover tuition and some portion of housing costs. Individuals who do not complete four years of in-state service would be required to pay back financial assistance.

Participating health carriers selected through a competitive bidding process will be required to meet an annual premium reduction target, starting with a 4 percent reduction in year 1 relative to the average second lowest-cost silver plan (i.e., benchmark against which premium tax credits are calculated) by county available on Nevada Health Link in plan year 2024 until it reaches at least 16 percent in year 4. In subsequent years, the premium cannot increase by a percentage greater than the increase in medical inflation plus any adjustments necessary to reflect local changes to utilization and morbidity. The requirements for the public option premiums expire on December 31, 2029.

Actuarial analysis conducted by Milliman, Inc. estimates potential for federal savings of $341 million to $464 million in the first five years and nearly $1 billion in the first 10 years. Because the estimated annual state operations budget for the public option is $3.75 million, a significant portion of federal funds could be used to implement the Market Stabilization Program. How the funds will be allocated across its three components is yet to be determined.

Regarding next steps, Nevada DHHS will update its Section 1332 waiver application with Governor Lombardo’s Market Stabilization Program. The current draft released in December 2022 proposes two discretionary uses of remaining pass-through funds: a quality incentive program, which will remain, and state-based premium subsidies, which will be replaced with the reinsurance program and financial assistance for health care providers. Provided the application is submitted by the end of the year, a final decision could be issued in summer or fall 2024.

Washington

Washington’s public option plan, Cascade Select, has been available on the state’s individual market, Washington Health Benefit Exchange, since plan year 2021. During the first three years, the Exchange made minimal changes to the standard benefit design of Cascade Select plans. In plan year 2024, the Exchange incorporated new value-based insurance design (VBID) features – two $1 primary care and mental health visits to bronze and silver plans.

Continuing in the VBID direction, the Exchange is considering ways to reduce spending in plan year 2025 on low-clinical value care and to reallocate spending to high-clinical value services without increasing premiums or deductibles. Additionally, the Exchange seeks to promote equity when considering what services to incentivize or disincentivize.

Specifically, the Exchange is considering two options at each metal level outlined in the draft 2025 standard plan designs on pp. 11-16:

• Option A: Keeps plan design at each metal level as similar as possible to 2024 plans, with adjustments only as necessary to keep the plan within the actuarial value (AV) range for the metal level. Such adjustments entail increases to the deductible or maximum out-of-pocket to offset increases in actuarial value (AV). 

• Option B: At Silver and Gold metal level, incorporates high-value generic tier ($10 silver, $5 gold). It is not possible to add high-value generics tier to Bronze and stay within the AV range. For both options A and B, it is necessary to subject preferred brand drugs to a deductible in the silver level.

The Exchange requests comments on stakeholder preference for each metal level, whether one set of options better accomplishes Exchange goals of balancing higher cost shares and promoting equity, potential premium impacts of the proposed options, feasibility of administering plan designs, and other feedback. Public comments are due November 27.

Colorado Option Public Hearings: Filings for 2024

Colorado Option Public Hearings: Filings for 2024

Based on initial rate filings for the 2024 plan year, no insurance carriers are able to meet the 10 percent premium rate reduction requirement for Colorado Option standardized plans. Most carriers identified the use of premium rates in 2021 as the baseline for the premium reduction as the primary reason for noncompliance. They point out that 2021 baseline premiums are based on 2019 claims data and therefore, do not reflect more recent trends in medical inflation and medical utilization as well as other policy changes. Regarding next steps, the Colorado Division of Insurance (DOI) will convene public hearings in June and July. These proceedings will likely result in the Insurance Commissioner requiring providers and hospitals to accept hospital-specific reimbursement floors established by DOI in order for carriers to meet premium reduction targets.

Premium Reduction Requirement

In the first year of the Colorado Option, plan year 2023, insurance carriers were afforded broad flexibility to negotiate provider reimbursement rates, as long as they offered plans that meet network adequacy requirements and the five percent premium rate reduction target. Starting with plan year 2024, DOI will enforce these requirements through public hearings. Carriers are required to offer a standardized plan in plan year 2024 with a premium that is reduced by 10 percent relative to their 2021 premiums.

Carriers Not in Compliance

DOI required carriers to notify the Insurance Commissioner by March 1, 2023 of the reasons why the carrier is unable to meet the premium rate reduction requirements or network adequacy requirements in plan year 2024. All returning carriers offering the Colorado Option in the individual and/or small group market provided a notice of noncompliance for all plan offerings across all metal levels. The rate filings of Select Health, a new entrant to the individual market for plan year 2024, are not publicly available.

Notably, all returning carriers acknowledge that the Insurance Commissioner will need to order providers and facilities to accept hospital specific reimbursement floors in order to meet premium rate reduction requirements. The carriers indicated that negotiations with providers and facilities are unlikely to result in lower negotiation rates.

Regarding next steps, DOI will convene public hearings to resolve payment disputes between carriers and providers in June and July. A public hearing could result in the Insurance Commissioner requiring certain hospitals and health care providers to accept hospital specific reimbursement floors established by the Insurance Commissioner, which range from 165 percent to 246.18 percent of Medicare

Reasons for Noncompliance

Most carriers, regardless of market, identified the use of premium rates in 2021 as the baseline for the mandatory 10 percent premium rate reduction in plan year 2024 as the primary reason for noncompliance. They point out that 2021 baseline premiums are based on 2019 claims data and therefore, do not reflect more recent trends in medical inflation and medical utilization.

Multiple carriers reference a critique by the American Academy of Actuaries on using the Consumer Price Index for medical services and medical care commodities (i.e., medical inflation trend) for premium development, which states, “Medical CPI is a retrospective measure and does not account for expected future spending, which is the basis for actuarial rate-setting.” Another carrier notes that the premium reduction target does not account for increases in medical utilization (up 3.4 percent year) and pharmacy utilization (up 2.3 percent per year) since 2019.

Relatedly, carriers contend that the 2021 baseline for the 2024 premium reduction target does not account for impacts of the COVID-19 pandemic and changes in market dynamics since 2019, such as the state reinsurance program launched in 2020, enhanced premium tax credits available through 2025, new mandated benefits, resumption of Medicaid redetermination in 2023, and new special enrollment periods.

In addition, some carriers cite challenges stemming from reimbursement negotiations with health care providers and facilities. One carrier explains that the surprise billing law in Colorado, coupled with the necessary cuts to reimbursement rates for carriers to meet premium reduction targets, create a financial incentive for providers and facilities to remain out-of-network. Another carrier notes that the mandatory premium reduction target does not recognize efforts by carriers and providers to negotiate lower reimbursement rates prior to the advent of the Colorado Option.

Colorado Option Regulations: Plan Design and Premium Rate Reduction Requirements for Plan Year 2024

Colorado Option Regulations: Plan Design and Premium Rate Reduction Requirements for Plan Year 2024

The Colorado Division of Insurance (DOI) adopted emergency regulations establishing the standardized plan designs and methodology for calculating premium rate reductions for the Colorado Option offered in plan year 2024.

Emergency Regulation 23-E-01: Establishes rules for the required Colorado Option standardized bronze, silver, and gold health benefit plans.

Emergency Regulation 23-E-02: Establishes the methodology for carriers to calculate premium rate reductions for Colorado Option standardized health benefit plans.

The emergency regulations implement the Draft 2024 Actuarial Value Calculator Methodology developed by the Department of Health and Human Services, which account for changes in medical and drug spending from plan year 2023 and other trend and projection factors. Carriers were required to notify DOI by March 1, 2023 on whether their plans for plan year 2024 comply with the premium rate reduction requirements and network adequacy requirements.

For the most part, the emergency regulations mirror regulations adopted for plan year 2023. Covered benefits and member cost sharing (copays and coinsurance) do not change in plan year 2024. The main difference is the actuarial value across the gold, silver, and bronze metal tiers, which impacts the deductible and out-of-pocket maximum for an individual and family as well as the maximum premium that a carrier can charge. As noted in Table 1 and Table 2, the actuarial value of plans across all metal tiers is slightly lower in plan year 2024 than in plan year 2023, meaning the plans are less generous for consumers who will face greater deductibles and out-of-pocket maximums.

Carriers are required to offer a standardized plan in plan year 2024 with a premium that is reduced by 10 percent relative to their 2021 premiums. DOI published maximum premium targets that a new carrier and existing carriers can charge on its Colorado Option plan in the individual market and small group market, by metal level and county, using a methodology developed by the Wakely Consulting Group. The targets do not account for reinsurance, which can further reduce premiums.

Colorado Option Regulations: Enforcement of Premium Rate Reduction Requirements

Colorado Option Regulations: Enforcement of Premium Rate Reduction Requirements

The Colorado Division of Insurance (DOI) adopted regulations for the enforcement of premium rate reduction requirements. In the first year of the Colorado Option, plan year 2023, insurance carriers were afforded broad flexibility to negotiate provider reimbursement rates, as long as they offered plans that meet network adequacy requirements and premium rate reduction requirements

Starting with plan year 2024, DOI will convene public hearings to address carriers that are unable to meet premium rate reduction requirements or network adequacy requirements. A public hearing could result in the Insurance Commissioner requiring certain hospitals and health care providers to accept payment rates established by the Insurance Commissioner. The public hearings, if convened, may indicate the need for cost-control measures directed at hospitals and health care providers to ensure carriers achieve mandatory premium targets.

In preparation for plan year 2024, DOI announced the proposed schedule for Colorado Option public hearings, which will take place in June for carriers in the individual market and July for carriers in the small group market. Additionally, DOI published individual and small group market target premiums and the hospital specific reimbursement floors for plan year 2024.

Reasons for a Public Hearing

DOI may convene a public hearing if a carrier fails to meet the premium rate reduction requirement (Regulation 4-2-85) or network adequacy requirements (Regulation 4-2-80), beginning in plan year 2024. Carriers are required to offer a standardized plan in plan year 2024 with a premium that is reduced by 10 percent relative to their 2021 premiums. DOI published maximum premium targets that a new carrier and existing carriers can charge on its Colorado Option plan in the individual market and small group market, by metal level and county, using a methodology developed by the Wakely Consulting Group. The targets do not account for reinsurance, which can further reduce premiums.

Procedures of a Public Hearing

The ultimate purpose of a public hearing is to resolve a payment dispute between an insurance carrier and provider(s) that stems from routine reimbursement negotiations. The dispute escalates to a public hearing if the parties are unable to settle on a reimbursement rate approved by the Insurance Commissioner. In Regulation 4-2-92, DOI lays out the procedures of public hearings, which can be divided into three stages: pre-hearing activities, public hearing proceedings, and issuance of decision. See Table 1 for more details.

Burden of Proof

In general, the burden of proof is on the party that makes an allegation. Some examples follow.

• If a carrier has notified the Insurance Commissioner that it is unable to meet the premium rate reduction requirements because of a hospital or health care provider, and the hospital or health care provider alleges that the carrier is able to meet the premium rate reduction requirements, then the burden of proof is on the hospital or health care provider to prove that the carrier is able to meet the requirements.

• If DOI alleges that a carrier has not met the premium rate reduction requirements, then the burden of proof is on DOI to prove that the carrier has failed to meet the requirements.

• If a party alleges a particular hospital or health care provider is the reason a carrier failed to meet the premium rate reduction requirements, the burden on proof is on the party to demonstrate that the hospital or health care provider prevented the carrier from meeting the premium rate reduction requirements and to justify the appropriateness of the reimbursement sought by the party through the public hearing. In this case, the party could be a carrier or a hospital or health care provider.

Regardless of the circumstances for the public hearing, a hospital or health care provider is permitted to present evidence that a carrier’s proposed reimbursement rate is insufficient.

Allowable Evidence

Evidence presented at the hearing is limited to information that is related to the reason the carrier failed to meet the network adequacy requirements on the premium rate reduction requirements for the Colorado Option plan in any single county. The following additional documentary evidence may be included:

•  An actuarial analysis demonstrating why the premium rate reduction requirements were not met;

• Negotiated rates with other providers in the same county.

• Enrollee and utilization data for the county.

• Provider financial data, including but not limited to, profit and loss statements and balance sheets. Providers may also submit other data to demonstrate unique circumstances that may not be represented in the rate setting process.

• Provider rates with other carriers.

• Carrier initiatives and assumptions to reduce health care costs for the county.

• Demographics and acuity of covered populations within the county.

Information submitted as part of the public hearing is considered to be part of the public record. However, any party may claim that information or documents submitted is confidential under applicable state and federal law. Confidential information will only be made available to the parties involved, and not the public.

Notably, all negotiations during the settlement period are considered confidential and may not be introduced into the public hearing. Additionally, DOI’s representatives that participate in the negotiations are “screened” from the public hearing, meaning they cannot disclose any information from the negotiations to the Insurance Commissioner.

Potential Outcomes of a Public Hearing: Reimbursement Floors

A public hearing may result in the Insurance Commissioner requiring hospitals and health care providers to accept reimbursement rates established by the Insurance Commissioner. Reimbursement rates cannot be lower than hospital or health care provider reimbursement floors specific to that hospital or health care provider, calculated using methodology established in Regulation 4-2-91.

DOI published hospital specific reimbursement floors for plan year 2024. The hospital specific reimbursement floors range from 165 percent to 246.18 percent of the Medicare Benchmark Reimbursement Rate. The health care provider reimbursement floor is 135 percent of Medicare Benchmark Reimbursement Rate.

Hospital Reimbursement Rate

The hospital specific reimbursement floor before adjustments is equal to the 155 percent of the Medicare Benchmark Reimbursement rate for that specific hospital. DOI is then able to make the following adjustments to the base rate:

• 20 percent increase for being an independent hospital or essential access hospital;

• Up to 30 percent increase for having a high share of Medicaid/Medicare patients; and

• Up to 40 percent increase for efficient management of underlying cost of care.

If this formula yields a hospital reimbursement rate less than 165 percent of the Medicare Benchmark Reimbursement Rate, then the hospital reimbursement floor will be equal to 165 percent of the Medicare Benchmark Rate. The pediatric hospital reimbursement floor may not be less than 210 percent of the Medicare reimbursement rate.

In determining the hospital’s reimbursement rate, the Insurance Commissioner may consider the following factors:

• Input from employee membership organizations in Colorado representing health care providers, including hospital-based health care providers;

• The cost of adequate wages, benefits, staffing, and training for health care employees to provide continuous quality care;

• The most current Medicare prospective or cost-based payment rates available, or any rate modifications published by the Centers for Medicare and Medicaid Services; and

• Any publicly available hospital and provider data and cost tools.

CMS Approves Colorado’s Section 1332 Waiver Amendment for Colorado Option

CMS Approves Colorado’s Section 1332 Waiver Amendment for Colorado Option

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On June 23, 2022, the Centers for Medicare and Medicaid Services (CMS) approved Colorado’s application to amend its existing Section 1332 waiver, and therefore allow full implementation of the Colorado Option – a standardized health benefit plan that must offer a culturally responsive provider network and satisfy premium reduction targets. The five-year waiver also extends Colorado’s existing reinsurance program. Colorado will use federal pass-through funding from premium tax credit (PTC) savings to support the reinsurance program and a new state subsidy program. The Colorado Option will be available in the individual and small group markets beginning plan year 2023.

How the Section 1332 Waiver Amendment Supports Premiums Reductions

As noted in Table 1, the amended waiver is instrumental for carriers of Colorado Option plans to implement required premium reduction targets. Colorado Option plans are required to reduce 2021 premium rates by 5 percent in 2023, 10 percent in 2024, and 15 percent in 2025. After 2025, carriers may only increase premiums by national medical inflation.

Impacts of Section 1332 Waiver Amendment

CMS determined that the amended Section 1332 waiver adheres to the four guardrails of 1332 waivers: coverage, affordability, comprehensiveness, and deficit neutrality. On behalf of Colorado, Wakely Consulting Group estimates that the amended Section 1332 waiver – specifically, the required premium reductions, reinsurance, and use of pass-through funding for state-based subsidies – will increase individual enrollment in affordable, comprehensive coverage and lower federal spending as compared to the baseline scenario without any waiver. The amended waiver is estimated to generate $1.618 billion in federal savings over the five-year period.

Potential Impacts of Federal Policy Changes on State-Based Subsidy Program

Beginning in plan year 2023, the new state-based subsidy program will provide subsidies to individuals that are ineligible for federal PTCs due to immigration status or lack documentation or are ineligible due to the so-called “family glitch.” Qualified individuals with an income up to 150 percent of the federal poverty level (FPL) will be offered a plan with a $0 monthly premium and 94 percent actuarial value.

Notably, two potential federal policy changes regarding PTC eligibility could unlock additional federal resources, and therefore allow the state-based subsidy program to provide more generous subsidies.

•  Extension of Temporary American Rescue Plan Enhancements to PTCs – The American Rescue Plan Act of 2021 (P.L. 117-2) temporarily increased the PTCs and extended eligibility to people with incomes above 400 percent of FPL. The enhancements expire at the end of 2022, but congressional Democrats are pushing to extend the enhancements beyond 2022 through the budget reconciliation process.

• “Family Glitch” Fix – The Biden Administration proposed a rule to fix the “family glitch,” which prevents family members from accessing PTCs if an employee’s self-only coverage meets the affordability threshold. If finalized, the regulation would take effect beginning plan year 2023.

Under current regulation, non-employee family members are not eligible for PTCs for individual market coverage if an employee is offered employer sponsored coverage that is “affordable.” An employer-sponsored plan is considered “affordable” if it meets two requirements: (1) employee required contribution for self-only coverage does not exceed the 9.5 percent affordability threshold (as adjusted); and (2) employer-sponsored plan provides “minimum value” to the employee, meaning it covers at least 60 percent of the total allowed cost of benefits and provides “substantial coverage of inpatient hospital services and physician services.” For plan years beginning in calendar year 2022, the affordability threshold is 9.61 percent of that employee’s household income. Current regulation does not account for the cost of coverage for family members, such a spouse and dependents.

The proposed regulation would apply the affordability rule to family coverage. Therefore, if the proposed regulation is finalized, an eligible employer-sponsored plan would not be considered “affordable” for related individuals if the employee’s required contribution for family coverage exceeds the affordability threshold. Consequently, the related individuals would be eligible for PTCs in the individual market.

With Support from Arnold Ventures

Summary of Colorado’s Draft Proposed Regulation on Culturally Responsive Network

Summary of Colorado’s Draft Proposed Regulation on Culturally Responsive Network

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On November 30, 2021, the Colorado Division of Insurance (DOI), within the Department of Regulatory Agencies (DORA), released the draft proposed regulation establishing additional carrier requirements to ensure Colorado Option plans offer diverse, culturally responsive provider networks. The proposed network adequacy requirements, essential community provider standards, and network access plan requirements aim to reduce health disparities among enrollees and improve racial health equity, which are explicit goals of the Colorado Option. The regulation would take effect March 2, 2022.

Network Adequacy Requirements

Currently, carriers are required comply with network adequacy standards regarding service wait time, geographic access, and provider availability. Carriers offering the Colorado Option would be required to attest that the network is not narrower than the most restrictive network that the carrier is offering for non-standardized plans in the individual market for the metal tier for that rating area. Additional parameters include:

• Demographic Data Collection – Carriers would be required to request network providers and their front office staff as well as plan enrollees to voluntarily submit demographic data – specifically, race and ethnicity, sexual orientation and gender identity, and ability status. To minimize the burden on network providers, carriers would include the request for demographic data in its request for data for the provider directory. Alternatively, carriers could obtain the demographic data through other available data sources. Provider demographic data would be included in network access plans filed with DOI annually and available to consumers upon request.

• Inclusion of Certified Nurse Midwives – To address racial disparities in maternal and infant health, carriers would be required to attest that at least one certified nurse midwife is available within the maximum road travel distance of an enrollee – e.g., five miles in large metro areas, 30 miles in rural areas.

• Training Requirements – Carriers’ customer service representatives would be required to complete at least one anti-bias, cultural competency, or similar training prior to the start of plan year 2023 open enrollment, which will begin in November 2022. They would be required to complete such training on an annual basis.

Additionally, carriers would be required to collect network provider and front office staff training information on an annual basis using a standard reporting form created by DOI – which would include, at a minimum, description and duration of training on anti-bias and cultural competency and any certifications. DOI would provide network providers additional time to come into compliance with the training requirement and, notably, would not require carriers to ensure 100 percent of providers and their front office staff have undertaken such training. Instead, carriers would have to ensure at least 50 percent of providers and their office staff have undertaken such training by January 1, 2023, followed by 75 percent by January 1, 2024, and 90 percent by January 1, 2025.

• Provider Directories – Carriers would be required to include additional information in Colorado Option provider directories regarding the availability of translation and interpretation services, accessibility-related services for people with disabilities and the procedures for request such services, and information on how to file a complaint related to the accuracy of the provider directory and/or the provider experience. In addition, provider directories (printed and online) would need to include the following details about network providers: providers who are multilingual or employ multilingual front office staff and languages spoken, if the provider offers extended and weekend hours, and the accessibility of the provider office and examination rooms for persons with disabilities.

• Language Access – Carriers would be required to ensure language assistance services, including American Sign Language and other communication services for people who are Deaf, Harding of Hearing, and Deafblind, are available at no cost for enrollees when communicating with customer service representatives and network providers. Carriers would be permitted to require enrollees provide “timely” notice of the need for language assistance. DOI elaborates, “Language assistance services are not timely if delay results in the effective denial of the service, benefit, or right at issue.” Additionally, carriers would be required to post taglines in at least the top 15 languages spoken by individuals with limited English proficiency indicating the availability of free language assistance services.

Essential Community Provider Standards

Current network adequacy standards require at least 30 percent of available Essential Community Providers (ECPs) in each plan’s service area participate in the plan’s network. ECPs predominantly provide care to “medically need or medically indigent patients” and charge for services on a sliding scale or waive charges altogether. DOI proposes to increase the minimum ECP standard to 50 percent.

Network Access Plan Requirements

In its network access plan, a carrier offering the Colorado Option would be required to include:

• Summary of demographic data collected;

• Summary of anti-bias, cultural competency, or similar training completed;

• Description of network providers and services to assist enrollees who experience higher rates of health disparities and inequities (e.g., community health workers or promotoras);

• Demonstration by service area that each network is no more restrictive than the carrier’s narrowest network; and

• An evaluation of carriers’ efforts to create a culturally responsive network. The evaluation must include description of how the carrier has assessed the network is adequate for the anticipated volume of demand for outpatient visits for perinatal, primary care, and behavioral health care as required in the standardized plan.

Action Plan Requirement

A carrier that does not meet the network access plan requirements would be required to submit an action plan that contains the following information:

• Description of outreach efforts to providers;

• Reasons providers did not or were unable to join the network;

• Reasons the carrier was unable to obtain demographic data from providers and/or enrollees; and

• Description of complaints from enrollees and how complaints were address.

Lastly, the carrier would be required to include corrective actions, including a set of measurable steps and goals as well as timelines. Enforcement measures include imposing civil monetary penalties, issuing cease and desist orders, and/or suspending or revoking licenses.

With Support from Arnold Ventures

Summary of Colorado’s Standardized Health Benefit Plan

Summary of Colorado’s Standardized Health Benefit Plan

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The Colorado Division of Insurance (DOI), within the Department of Regulatory Agencies (DORA), released the draft proposed regulation that would establish the requirements for the Colorado Option standardized health benefit plan. Beginning January 1, 2023, the Colorado Option will be offered at the bronze, silver, and gold tiers in the individual and small group markets.

The proposed regulation will take effect on March 17, 2022. Carriers have until May 1, 2022, to notify DOI if they cannot offer the Colorado Option at the premium rate target – a five percent premium reduction from 2021 filed premium – for benefit year 2023. DOI will review standardized plans in the May through July and release standardized plan rates in September or October. The Colorado Option will be available for purchase in November.

Background

Under House Bill 21-1232, the standardized benefit design must be developed through a stakeholder engagement process with a targeted focus on soliciting input from a diverse cross-section of organizations and communities. Additionally, the standardized health plan must be designed, with input from consumer stakeholders, to improve racial health equity and decrease racial health disparities. Improving perinatal health care coverage and providing first-dollar, pre-deductible coverage for certain high-value services, such as primary and behavioral health care, are among the health equity-focused strategies delineated in the law.

Standardized Health Benefit Plan

Table 1 summarizes the standardized plan designs across bronze, silver, and gold tiers. Carriers will also be required to meet current federal and state requirements (e.g., essential health benefits). If DOI determines a carrier’s standardized plan does not comply with financial requirements and quantitative treatment limitations under the Mental Health Parity and Addiction Equity Act of 2008, then DOI will modify the cost sharing structure to meet those requirements.

• Gold and silver Colorado Option plans would cover all primary care visits, behavioral health visits, and prenatal and postnatal visits with no cost-sharing. Bronze plans would provide first-dollar, pre-deductible coverage for the first three visits for each type before a $50 copay would be required.

• All three metal tiers would cover certain diabetes self-management education with $5 co-sharing and the Colorado QuitLine for tobacco cessation program with $0 cost-sharing.

The draft proposed regulation also includes plan designs for standardized silver cost sharing reduction plans (73% AV, 87% AV, and 94% AV) that are only required to be offered in the individual, on-Exchange market.

With the Support of Arnold Ventures

CMS Confirms Colorado’s Section 1332 Waiver Amendment Application is Complete

CMS Confirms Colorado’s Section 1332 Waiver Amendment Application is Complete

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In Brief

On January 3, 2022, the Centers for Medicare and Medicaid Services (CMS) sent a letter to Colorado confirming that the state’s application to amend its existing Section 1332 waiver is considered complete. This notice triggers the 180-day full review of the application by the agency and a 30-day federal public notice and comment period. Comments are due by February 2 and a decision from CMS could be expected sometime in July. 

The waiver amendment would allow the state to implement plan-level rating variations for the Colorado Option in the individual and small group markets beginning in 2023 and extend its reinsurance program through 2027. If approved, Colorado would receive approximately $135 million annually in federal funding to top provide additional premium subsidies and to continue the state’s reinsurance program

Additional details on the 1332 waiver amendment application follow.

Overview

The Colorado Department of Insurance (DOI) Section 1332 Innovation Waiver Amendment Request would modify the current waiver for Colorado’s reinsurance program and implement the Colorado Option (standardized benefit plan) in the individual and small group markets. The pass-through savings generated through the waiver will be used to provide subsidies to individuals not eligible for premium tax credits under the Affordable Care Act (ACA) – specifically, persons ineligible due to immigration and documentation status and persons otherwise excluded from federal assistance.

 Colorado is specifically seeking to waive the following provisions:

•  Continued waiver of the single risk pool to support and continue the reinsurance program; and

• Waive the de minimis variation of actuarial value to support the Colorado Option plan design.

The waiver request demonstrates how implementing the Colorado Option satisfies the four guardrails of 1332 waivers: coverage, affordability, comprehensiveness, and deficit neutrality. Colorado estimates that the waiver will increase coverage and decrease premiums, while maintaining comprehensiveness and deficit neutrality. The five-year waiver would take effect in conjunction with the start of the Colorado Option on January 1, 2023. The waiver would end on December 31, 2027. Public comments can be submitted on the waiver until November 15, 2021. The DOI is also hosting two virtual public hearing on the waiver request on November 9 and November 10. The Centers for Medicare and Medicaid Services (CMS) is expected to review the waiver amendment for completeness and open a public comment period in the first quarter of next year.

Below are the key highlights of the waiver amendment:

1. The waiver is intended to secure pass-through funding to support a first-in-nation subsidy program. The premium subsidies would be provided to individuals not eligible for ACA premium tax credits (family glitch) and persons without documentation or otherwise excluded from federal assistance.

   Because Colorado Option plans are required to meet certain premium reductions over the next five years, the state expects the implementation of the waiver to result in significantly lower expenditures from the federal government on tax credits. Colorado requests pass-through funding in the amount of savings in federal expenditures for premium tax credits as well as the savings generated through the reinsurance program

2. Waiving the de minimis variation of the actuarial value (AV) of Colorado Options plans has a two-fold purpose. Colorado notes that the first reason the state seeks to waive the de minimis variation is that when designing the standardized bronze, silver, and gold level plans, the expected AV levels of the standardized plans suggest a need to limit the de minimis variation. The state details that it will continue to review plan rates to determine the extent to which de minimis limitation is needed to prevent higher base AV levels from being reduced to meet Colorado Option premium reduction requirements.

    Additionally, Colorado states that under current allowable de minimis ranges, non-Colorado Options plans could offer plans that undermine the legislation’s goals of offering equitable plans that mitigate health disparities, such as high deductible health plans. By waiving the de minimis variation, Colorado believes it will allow the DOI oversight tools necessary to ensure the Colorado Option can meet the goals of providing better coverage, mitigating health disparities, and reducing costs.

3. Enrollment is expected to increase by 4.3 percent relative to the baseline and 1.3 percent relative to the current waiver by 2027. Colorado expects the waiver to reduce the cost of coverage and offer additional subsidies, which will result in more Coloradans having insurance coverage as compared to without the waiver. The state does not expect any loss in carrier participation as a result of the waiver, but does expect increased market stability through lower overall acuity in the risk pool and increased market participation.

4. Premiums are estimated to decrease by 32.3 percent relative to the baseline and 16.6 percent relative to the current waiver by 2027. The state details that the combination of the reinsurance program, the subsidy program, and the Colorado Option will all have an effect of lowering premiums in the individual market as compared to costs without the waiver. In the small group market, Colorado expects that the lower Colorado Option premiums will result in small employers requiring smaller premiums contributions from employees, increasing affordability.

5. Implementation and uptake of the Colorado Option, made possible by the waiver, will advance the law’s health equity goals. The Colorado Option legislation requires the state to consider the implication of health coverage innovations on health equity and requires the following:

   1. The networks available under the Colorado Option plans are “culturally responsive, and to the greatest extent possible, reflects the diversity of its enrollees in terms of race, ethnicity, gender identity, and sexual orientation in the area that the network exists;” and

   2. Standardized benefit plans are “designed to improve racial equity and decrease racial health disparities through a variety of means”

   The state details that while network elements are not contingent upon the waiver amendment approval, takeup of the Colorado Option plans may be significantly reduced without the premium reductions elements made possible by the waiver, which in turn would diminish the impact of the network elements. Additionally, Colorado asserts that implementation of the Colorado Option, through the waiver, will have a significant effect in reducing racial disparities of coverage and affordability of coverage.

With the Support of Arnold Ventures

Summary of Colorado’s Draft Emergency Regulation for 2023 Premium Rate Methodology

Summary of Colorado’s Draft Emergency Regulation for 2023 Premium Rate Methodology

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On January 12, 2022, the Colorado Division of Insurance (DOI) released a Draft Proposed Emergency Regulation 22-E-XX on the Methodology for Calculation Premium Rate Reductions for the Colorado Option Standardized Health Benefits Plan. To accompany the regulation, Wakely Consulting Group released an analysis of the Colorado Option rate target methodology

The regulation is intended to provide all carriers offering individual and small group health benefit plans the allowable adjustments for the calculation of the premium rate reduction methodology as required for the Colorado Option. The DOI asserts that the immediate adoption of the regulation is necessary to allow carriers adequate time to implement their standardized plans and notify the DOI if they cannot offer premiums at the premium rate target by May 1, 2022.

Comments on the draft regulation were due January 20. With the May 1 deadline for plans to submit their bids, we can expect the DOI to finalize the emergency regulation as soon as possible.

Background

Insurance carriers offering the standardized health plan at the bronze, silver, and gold metal levels are required to offer a premium that is reduced by the following amounts relative to their 2021 premiums:

• Five percent premium reduction for the benefit year beginning 2023;

• 10 percent premium reduction for the benefit year beginning 2024; and

• 15 percent premium reduction for the benefit year beginning 2025;

For benefit years beginning in 2026 and subsequent years, plans are required to limit any premium rate increase to the rate that is no more than medical inflation, relative to the previous year.

Methodology

Under the draft regulation, target rates will be developed separately for each issuer, county, metal level, and market, and be based on 2021 filed premiums (unadjusted benchmark premium), with certain adjustments. The DOI outlines the following methodology and adjustments it will use to determine if a carrier meets the specific premium reduction:

1.     Determine 2021 benchmark plan premiums

• Bronze and Expanded Bronze health benefit plans will be combined to determine the lowest cost premium rate for the Bronze Colorado Option Standardized Plan

• For the individual market, the 2021 baseline plan adjusted premium is the product of the following:

  • Minimum 2021 Calibrated Plan Adjusted Index Rate offered in the county for the metal level;

  • 1.0 age factor; and

  • 2021 Geographic Rating Factor for the applicable county

• For the small group market, the 2021 baseline plan adjusted premium is the product of the following:

  • Minimum annual filing 2021 Calibrated Plan Adjusted Index Rate offered in the county for the metal level;

  • Fourth quarter rate of 2021 Baseline Plan / first quarter rate of 2021 Baseline Plan

  • 1.0 age factor; and

  • 2021 Geographic Rating Factor for the applicable county

2.     Adjust 2021 benchmark plan premiums to benefit year – The 2021 benchmark plan premium with be adjusted by the following factors:

•  Changes in member cost sharing – This will be based on the issuer actuarial value submitted in the plan and benefits template for 2021 plan design and the Colorado Option in the applicable year.

• Induced demand – This will reflect the changes in the induced demand factor applied in 2021 and the applicable Colorado option plan design.

• Cost sharing reduction (CSR) plan loading – For silver plans only, the 2021 benchmark premium will be adjusted for changes in CSR load between 2021 and applicable plan year.

• Benefit change – This adjustment will be based on the cost impact of the benefit changes in the actuarial analysis submitted to CMS for approval of these essential health benefits (EHB)-benchmark plan changes.

• Trend – This will be calculated based on the latest CPI-U published prior to the publication of the bulletin with maximum allowable premium rates in February or March of each year.

• Rate reduction – The 2021 premium will be reduced by five percent in 2023, 10 percent in 2024, and 15 percent in 2025.

The Wakely report provides examples of premium rate reductions for the individual and small group plans in Appendix B on p. 12.

Filing Requirements

The draft regulation states that carriers must submit the notification of whether Colorado Option Standardized Plans will meet the required premium rate reductions through the “Colorado Option Standardized Plan Premium Rate Reduction” template supplied by the DOI through an “Colorado Option Rate Reduction Notice” filing.

With support from Arnold Ventures

Summary of Colorado’s Draft Standard Health Benefit Plan

Summary of Colorado’s Draft Standard Health Benefit Plan

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The Colorado Division of Insurance (DOI), within the Department of Regulatory Agencies (DORA), recently released a draft of the preliminary emergency regulation that would establish the standardized health benefit plan (i.e., Colorado Option). Beginning January 1, 2023, the standardized plan will be offered at the bronze, silver, and gold levels in the individual and small group markets.

Under House Bill 21-1232, the standardized benefit design must be developed through a stakeholder engagement process with a targeted focus on soliciting input from a diverse cross-section of organizations and communities. Additionally, the standardized health plan must be designed, with input from consumer stakeholders, to improve racial health equity and decrease racial health disparities. Improving perinatal health care coverage and providing first-dollar, pre-deductible coverage for certain high-value services, such as primary and behavioral health care, are among the health equity-focused strategies delineated in the law.

In the draft preliminary regulation, DOI proposes the Colorado Option to include the following coverage. Notably, DOI seeks to waive the actuarial value (AV) de minimis ranges under federal regulation in its draft version of the Section 1332 Innovation Waiver Request due to the standardized plan requirements and the 15% premium reduction requirement (by 2025) of the Colorado Option. Additionally, DOI is concerned that, under current federal regulations, non-Colorado-Option plans could offer “plans at a lower AV that are inequitable and exacerbate health disparities.”

With support from Arnold Ventures

Summary of Colorado Option Standardized Plan Stakeholder Meetings: Updated on 10/7

Summary of Colorado Option Standardized Plan Stakeholder Meetings: Updated on 10/7

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Introduction

In accordance with House Bill 21-1232, signed into law by Governor Jared Polis, the Colorado Division of Insurance (DOI) must develop the standardized health benefit plan (i.e., Colorado Option) – slated to go live on January 1, 2023 – with input from a diverse cross-section of organizations and communities. Over the next several months, DOI will convene six stakeholder engagement meetings to discuss the framework for the standardized plan, culminating in a final rule. The final rule must be adopted by January 1, 2022.

Notably, DOI is gathering stakeholder input on a relatively accelerated timeline in order to submit a 1332 state innovation waiver application to the Centers for Medicare and Medicaid Services (CMS) by November 30, 2021. Through the federal waiver, DOI would receive pass-through funding from savings generated by implementation of the standardized health benefit plan. The savings will be directed to Colorado’s reinsurance program, administered by the Colorado Health Insurance Affordability Enterprise, and used to increase the value, affordability, quality, and equity of health care coverage for all Coloradans.

Scope of Stakeholder Engagement Process

The stakeholder engagement process is primarily focused on the design of the standardized health benefit plan – specifically:

• Actuarial Value (how much does plan pay vs. how much person pays);

• Cost-sharing (coinsurance vs. copay; how much?); and

• Reducing racial health disparities through plan design.

DOI will pursue a separate stakeholder process regarding provider network requirements. Additional details about other components of the Colorado Option – mandatory cost-sharing reductions and 1332 state innovation waiver – are available in our summary of House Bill 21-1232.

 Timeline

Standardized Health Benefit Plan

House Bill 21-1232 requires insurance carriers to offer the standardized health benefit plan through the Exchange (i.e., Connect for Health Colorado; individual and small group markets) and through the Public Benefit Corporation (individual market), beginning in plan year 2023. Carriers must offer the standardized plan at a premium rate that is at least five percent less than the premium rate offered in 2021 in each of the first three years of offering the standardized plan, resulting in a 15 percent premium reduction in plan year 2025 compared to plan year 2021. For plan year beginning 2026 and subsequent years, the carrier must limit any annual premium rate increase to no more than medical inflation relative to the prior year.

Additionally, the law sets broad parameters for the design of the standardized health benefit plan.

• Metal Tiers: Offers coverage at the gold, silver, and bronze levels.

• Benefits: Covers essential health benefits (EHBs) required by the Affordable Care Act (ACA) and Colorado.

• Racial Health Equity: Is designed to improve racial health equity and decrease racial health disparities through strategies, including –

  • Perinatal health care coverage; and

  • First-dollar, pre-deductible coverage for certain high-value services, such as primary care and behavioral health care.

• Provider Network Adequacy: Has a network that is culturally responsive, representative of the community it services, and not narrower than the most restrictive network that the carrier is offering in the same area and same metal tier.

 Other design considerations identified by DOI are market competition and value-based insurance design. The stakeholder engagement process will determine, at a more granular level, the cost-sharing and benefit design.

Key Takeaways from Stakeholder Meetings (schedule and materials available here)

 July 29th: Meeting #1 – Overview of the Legislation and Stakeholder Engagement Process

1. DOI staff welcome feedback on the design of the standardized health benefit plan through various channels – public comments at stakeholder engagement meetings, email (dora_ins_co_option@state.co.us), and Google forms for future meetings. The rulemaking process will also entail a public comment period. Michael Conway, Colorado Insurance Commissioner, emphasized his openness to feedback and intent to have “productive conversations.”

2. Kyle Brown, Deputy Commissioner for Affordability Programs, is DOI’s point person for stakeholder engagement (Kyle.m.Brown@state.co.us). Other DOI staff contacts are:

   • Cara Cheevers, Behavioral Health Program Director (Cara.Cheevers@state.co.us);

   • Debra Judy, Deputy Commissioner for Policy Affairs (Debra.Judy@state.co.us); and

   • Leilani Russell, Health Initiatives and Implementation Project Manager (Leilani.Russell@state.co.us)

3.  Colorado’s standardized health benefit plan may draw from existing standardized plans. Brown noted the availability of standardized plans in seven states (California, Connecticut, Massachusetts, New York, Oregon, Vermont, and Washington) and the District of Columbia as well as common elements featured in those plans – including: deductible, out-of-pocket maximum, and copay or coinsurance for services (see slides 18 and 19). Of note, CMS intends to propose standardized plan designs in the forthcoming 2023 notice of benefit and payment parameters, according to the third installment of the ACA payment parameter updates for 2022. How this plan will affect Colorado’s standardized health benefit plan is unclear at this point.

4. The stakeholder engagement process will examine the trade-offs of various plan designs – i.e., between coverage and cost-sharing within the bounds of the metal tiers. Specific questions noted by DOI include:

   • If certain services are pre-deductible, what cost sharing must increase to maintain actuarial value?

   • How does actuarial value impact premium?

   • Where should Colorado target the actuarial value for the standardized plan

     DOI has contracted (or will contract) with a firm to conduct actuarial analysis. Another consideration that will be analyzed is the interaction between standardized health benefit plans and premium tax credits.

5. DOI’s strategies for reducing health disparities include first-dollar, pre-deductible coverage or incentives for certain high-value services. The law does not define “high-value services,” and therefore DOI seeks stakeholders input on identifying these high-value services. The third meeting will focus on this issue.

6. The same standardized health benefit plan will be offered in the individual and small group market, but carriers may be given some flexibility that allows for variation within plans, according to Brown. The plan is unlikely to include benefits beyond EHBs.

7. DOI aims to finalize the rule establishing the standardized health benefit plan by November, for purposes of informing the 1332 state innovation waiver application, and may be released as soon as September, according to Brown. He acknowledged that the release may be delayed depending on stakeholder engagement.

August 13th: Meeting #2 – Required Benefits and Introduction to Cost-Sharing and Benefit Design

1.      The standardized plan will cover Essential Health Benefits (EHBs) as defined in Colorado’s benchmark plan, which may include additional benefits if approved by the Centers for Medicare and Medicaid Services (CMS). DOI recently submitted the following proposed changes to Colorado’s benchmark plan:

• Adding acupuncture – covering up to six visits per member per benefit year

• Adding gender affirming care;

• Adding a mental wellness exam – covering one 45-60 minute visit per year that includes services such as behavioral health screening, education and consultation on health lifestyle change, referrals to ongoing mental health treatment, and discussion of potential options for medication; and

• Expanding the required number of drugs covered for certain United States Pharmacopeia (USP) classes, also referred to as “Alternatives to Opioids” or ALTOs.

 The final determination is expected this summer. If approved, the revised benchmark plan will become effective for 2023 (when the standardized plan is also slated to take effect).

2.   To design a standardized plan that meets the parameters of covering EHBs and offering coverage at the gold, silver, and bronze levels, DOI is examining tradeoffs between premiums and cost-sharing – (1) higher actuarial value plans with higher premiums and lower cost-sharing; or (2) lower actuarial value plans with lower premiums and higher cost-sharing. Advancing racial health equity is a top consideration for DOI – specifically, more coverage (i.e., lower cost-sharing) for high-value services.

A consumer advocate noted that “people often get subsidies for premium,” emphasizing that the standardized plan should prioritize lower cost-sharing over lower premiums. A broker in favor of a standardized plan with lower premiums pointed out that the lack of transparency around actual health care costs makes it difficult to figure out the actual cost-sharing amount.

DOI is looking to stakeholders for input in identifying high-value services. The next meeting will focus on how incentivizing high-value care, presumably through first-dollar coverage or lower cost sharing, can reduce health disparities and improve health equity. 

3.   One challenge to identifying high-value services at the plan level is selecting a specific set of services considered to be high value that addresses the needs of a diverse population. Whether DOI will build flexibility into the standardized benefit plan that allows health care providers to decide which services are high value for their patients remains to be seen. A family physician from the Colorado Medical Society noted that the context for the patient must be considered (e.g., a specific drug may be considered high value for one patient but not another patient). Another physician emphasized the need to consider accessibility, such as distance and travel time, when determining high-value services. 

4.   DOI will host additional meetings with specific stakeholder groups for more focused discussions on the design of the standardized plan. DOI will meet with:

• Consumer groups and community members;

• Hospitals and other health care facilities;

• Providers;

• Health plans (Brown also noted that DOI will meet with brokers; and

• Rural entities and community members.

September 9th: Meeting #3 – Incentivizing high-value care: How can it reduce health disparities and improve health equity?

1.To meet the statutory requirement that the standardized plan be designed to reduce health disparities and improve racial health equity, DOI sought input on (1) which health disparities should be prioritized and addressed; and (2) evidence-based approaches that can be incorporated into the plan design. The Colorado Department of Public Health and Environment (CDPHE) and consumer advocates (Colorado Consumer Health Initiative and Colorado Center on Law and Policy) presented considerations for plan design that generally aligned with one another.

2. Overall, CDPHE and consumer advocates identified the same or similar health disparities.

3. Stakeholders discussed a variety of plan design considerations to address the identified key health disparities – e.g., which services to cover, when to waive cost-sharing.

4.Consumer advocates emphasized their preference for copay rather than coinsurance, noting “copay structures create transparency.” Additionally, they called for relatively low deductibles. Their presentation states, “Most Coloradans identify any deductible above $1,000-$2,000 as unaffordable/causing financial hardship.”

5.Consumer advocates cautioned against using the term “low-value services,” explaining that “certain services that are deemed low-value services may be considered higher value for communities of color.” They cite an article published in the Health Affairs Blog (May 21, 2021) that calls on the broader health care and health policy community to recognize the role of systemic racism in health outcomes and for a “re-examination of what low-value and high-value care means to the well-being of communities of color.”

September 24th: Meeting #4 – Plan Design and Cost Sharing Part 1

1.To inform the design of the standardized plan, DOI is looking at what plans people are currently buying. Notably, the most recently available information is from 2019, which does not reflect the impact of enhancements to premium tax credits (made available by the American Rescue Plan Act of 2021, P.L. 117-2). Among plans with highest enrollment, some common themes emerged:

• There is a mixture of copays typically for highly utilized services and coinsurance typically for higher cost, lower utilized services.

• Primary care visits, generics, and urgent care offered prior to deductible.

• On actuarial value (AV), gold plans tended to span the de minimis range, while silver plans were more concentrated in the lower half of the required range and bronze plans were more concentrated at the high end of the required range.

2.Stakeholder feedback is coalescing around some common themes that generally align with consumer behavior.

• Support copay cost-sharing structure to facilitate price transparency and predictability.

• Balance lower premiums with maximizing subsidy amounts for eligible individuals.

• Incentivize primary care visits, generic drugs, and behavioral health visits through no to low cost-sharing limits.

3. Julie Peper from Wakely presented draft plan designs at the gold, silver, and bronze metal levels. The sample plan designs were intended to “facilitate discussion around the structure and priorities for plan design as well as the potential trade-off between cost sharing and AV/premiums.” Based on the examples presented, the main decision points appear to be:

• Whether to pursue a plan that prioritizes the use of copays over coinsurance (or vice versa). Peper explained, “Plan designs with more fixed elements, such as copays, will likely require more substantial updates year over year to maintain compliance with AV requirements versus a plan design that is largely coinsurance-based, where the value of the member cost sharing increases proportionately to the underlying claim cost.” DOI is unlikely to view the need to annually update the standardized plan as a downside, since Commissioner Insurance Commissioner Michael Conway has indicated that there will be an annual process to update the standardized plan.

Which benefits will be available prior before the deductible. These benefits will likely reflect benefits that DOI views will improve racial health equity.

4. Deputy Insurance Commissioner Kyle Brown signaled that DOI will soon release the proposed regulation establishing the standardized plan (possibly in early October). There will be a public comment period. DOI aims to finalize the regulation by November ahead in order to submit a 1332 state innovation waiver application to CMS by November 30, 2021.

With support from Arnold Ventures

Prime Sponsors Withdraw Colorado Affordable Health Care Option Act for 2020 Session Due to Coronavirus Pandemic

Prime Sponsors Withdraw Colorado Affordable Health Care Option Act for 2020 Session Due to Coronavirus Pandemic

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On May 4, 2020, Colorado state Sen. Kerry Donovan (D) and Reps. Dylan Roberts (D) and Chris Kennedy (D), prime sponsors of the Colorado Affordable Health Care Option Act (summary), announced that they are withdrawing the bill for this session in light of the coronavirus pandemic.

Sen. Donovan and Reps. Roberts and Kennedy note that the demands of the public health crisis make it impossible for hospitals, doctors, insurance carriers, and other stakeholders to robustly engage in the legislative process. They intend to introduce the bill next session.

The Colorado Affordable Health Care Option Act would have required insurance carriers that offer an individual health plan to offer the Colorado Option in the individual market in each county where carriers offer individual plans, beginning January 1, 2022. Hospitals would have been required to participate in the Colorado Option and accept reimbursement rates set by the state, or potentially face fines of up to $50,000 per day.

Prior to the Colorado General Assembly temporarily adjourning on March 14, 2020 the House Committee on Health & Insurance had favorably referred the bill to the House Committee on Appropriations by a party line vote of 7-4 (summary).

The General Assembly is tentatively scheduled to resume the legislative session on May 18, 2020.

Expected Hospital Reimbursement Rates Under the Colorado Affordable Health Care Option

Expected Hospital Reimbursement Rates Under the Colorado Affordable Health Care Option

Download the Expected Hospital Reimbursement Rates

On March 6, 2020, the Colorado Division of Insurance (DOI) and the Department of Health Care Policy and Financing (HCPF) released the expected reimbursement rates for all Colorado hospitals under the state’s recently introduced Colorado Affordable Health Care Option (details on the full bill here).

In an accompanying press release, DOI and HCPF report that, on average, Colorado hospitals are able to cover their costs with a reimbursement rate of 143 percent of Medicare rates. The state agencies then note that the current bill text sets the base reimbursement level for all hospitals at 155 percent of Medicare, and includes a series of upward adjustment factors based on hospital-specific characteristics (i.e., whether the hospital is an independent or Critical Access Hospital; whether they serve a higher-than-average percentage of Medicare or Medicaid beneficiaries; or, whether hospitals efficiently manage administrative costs).

In these projections, DOI and HCPF include estimates ranging from 155 percent to a maximum reimbursement estimate of 238 percent of Medicare rates.

Summary of Colorado’s Health Insurance Option Hospital Rate-Setting Formula and Subsidies

Summary of Colorado’s Health Insurance Option Hospital Rate-Setting Formula and Subsidies

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On Monday, February 24, the Colorado Departments of Insurance and Health Care Policy and Financing released details regarding their proposed approach to setting hospital reimbursement under the Health Insurance Option program. The release included a report from Wakely Consulting that provides more detail regarding the state’s proposal to use Federal pass-through funding to establish expanded premium and cost-sharing subsidies in the individual market. Together, these policies would drive an 18,100 decrease in the number of uninsured in the state when the program goes live in 2022, a substantial increase from the initial estimate of 5700.

Details of Hospital Reimbursement Formula

The Governor’s proposal, delivered to the state legislature in November 2019, recommended that hospitals be required to participate in the public option program at reimbursement levels set by the state. The recently issued details specify that the reimbursement methodology would set hospital rates between 155 and 218 percent of what Medicare pays. Statewide, the average reimbursement rate would be 168 percent of Medicare, yielding average statewide premium savings of 12 percent.

Hospitals could receive additional compensation under four adjustment factors:

1. If the hospital is an independent hospital (i.e. not owned by a system with more than two hospitals) or critical access hospital (20 percent for each, up to 40 percent if both);

2. If the hospital serves a high percentage – 65 percent or more – of Medicare or Medicaid beneficiaries (up to 30 percent, depending on percentage served); and

3. Relative to state averages, whether the hospital is good at managing administrative costs and the underlying cost of care, or if it already charges reasonable rates (up to 40 percent).

a.  Hospitals can receive: (1) up to 10 percent if operating costs are lower than the state average, (2) up to 10 percent if prices charged are lower, and (3) up to 20 percent if profit margins are lower.

Proposed Subsidies Expansion

While the state had already indicated it intends to apply for a Federal waiver to fund new benefits, this release provides more detail regarding the additional premium and cost-sharing subsidies the state would pursue. Using over $40 million in annual pass-through funding from the waiver, the state would reduce the portion of household income that subsidized consumers are required to contribute to their premium by between 0.7 to 1.2 percent, which equates to $280 annually on average per person.

The state would also apply waiver funding to increase cost-sharing subsidies. Households with incomes between 200 to 249 percent of the Federal Poverty Level (FPL) enrolling in silver level plans would see the actuarial value (AV) of their benefit increase from 73 to 77 percent. Those with incomes between 250-399 percent FPL, who currently do not qualify for any cost-sharing assistance, would see the AV of their silver plan options increase from 70 to 73 percent.

With support from Arnold Ventures

Summary of Colorado’s Final Report Detailing a Public Option Plan

Summary of Colorado’s Final Report Detailing a Public Option Plan

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In Brief

• Lead Agencies Seek Authority to Mandate Provider Participation at State-Set Rates: In the report, lead state agencies seek authority to require providers to participate in regions where public option networks are otherwise insufficient. Reimbursement levels will be set on a hospital-specific basis between 160 to 210 percent of Medicare, which the state asserts should be sufficient to encourage many providers to participate voluntarily. The state also seeks authority to mandate health insurance carrier participation if necessary.

• Unsubsidized Enrollees will Realize Substantial Premium Savings: Colorado estimates Exchange enrollees who are not eligible for subsidies will see premium savings between approximately 10 and 15 percent. Rural areas may see greater discounts than urban ones. As obliquely referenced in the appended actuarial analysis, however, because the state’s proposal introduces multiple lower-cost public options to the market, subsidized enrollees throughout the state would likely see nominal impact on their net premium contributions and may in some cases see their premium costs go up.

• Coverage Gains will be Modest: The report finds that about 5,700 of currently uninsured residents will gain coverage under the program due to premium discounts. New enrollees are projected to have relatively low morbidity, limiting the financial impact of the coverage increase. To the degree new enrollees qualify for subsidies, the cost of their coverage will be funded with federal dollars.

• New Legislation Required: Further state legislative action and subsequent implementation guidance will ultimately dictate how the public option plan is structured. Changes in the federal regulatory environment and the underlying market could also substantially alter the program’s effects. The Colorado legislature has convened for its 2020 session and the lead authors of the initial public option legislation are currently drafting a “2.0” public option bill.

Background

Despite federal government subsidies instituted under the Affordable Care Act (ACA), health care is still unaffordable for many people across the country. Colorado is taking a novel approach to address this problem. With the passage of HB19-1004 in May 2019, the Colorado Department of Health Care Policy and Financing (HCPF) and the Colorado Division of Insurance (DOI) were tasked with designing a plan for offering a public health care coverage option. That plan was submitted to the legislature on November 15, 2019. Here we summarize that document and the appended analysis from Wakely Consulting.

Colorado’s Plan

HB19-1004 (see our legislative summary here) specifies that the state DOI and HCPF work together to create a state public option that is more affordable than health care coverage options currently available through the individual and small group health insurance markets. The public option must also meet several key goals, including increasing consumer access and insurer competition in a way that limits costs and leverages state infrastructure and expertise.

Under the DOI-HCPF plan, the new state public option would begin in January 2022. All carriers in the individual market are required to offer public option plans on and off the individual Exchange market at the Bronze, Silver, and Gold metal tiers, with at least two public options in each county (there are currently 22 counties in Colorado with only one carrier in the individual market). The proposal recommends that the state seek a federal section 1332 waiver to allow it to recoup the advanced premium tax credit (APTC) savings anticipated under the program. This “pass-through funding” would be dedicated to adding benefits or increasing cost-sharing or premium subsidies.

Enrollment. Public option plans will be open to all Colorado residents in the individual market. The state anticipates many areas will have “dozens” of new options to choose from, stemming from the requirement that all existing plans in the market participate in the program.

Total individual market enrollment is expected to increase by 5,700 members or 0.05 percent, sourced entirely from the unsubsidized population and due to anticipated premium savings for these consumers. The average cost of covering these individuals would be 73 percent of the current average ACA market enrollee due to projections that they will be, on average, healthier than the currently covered population. Because they are enrolling due to a price reduction, actuaries assume their health needs are not as dire as the average consumer.  

As for the subsidized population, the Wakely report suggests that approximately 50 percent of subsidized enrollees will switch to a public option plan. Because they are unlikely to see meaningful discounts in their net premium contributions, uninsured consumers eligible for subsidies would only choose to enroll if the state includes additional cost-sharing in its allocation of pass-through funding under the waiver.

Affordability. Colorado’s plan is expected to decrease average premiums by approximately 10 percent, with consumers saving (on average) more than 15 percent in rural parts of the state. The state’s plan to set hospital rates between 160 and 210 percent of Medicare reimbursement is the sole driver of these savings (current reimbursement rates in the individual market are approximately 254 percent of Medicare). Because all existing plans are required to offer public options, the lowest cost plan in each market will be a public option plan.

Colorado proposes to determine hospital reimbursement for public option plans on a facility-specific basis. Under this model, which is still being refined, facilities with less than 50 percent Medicare/Medicaid services would receive a maximum reimbursement rate of 160 percent of Medicare, while facilities with more than 85 percent Medicare/Medicaid services would receive a maximum reimbursement rate of 210 percent of Medicare. The state’s plan also requires carriers to ensure that all rebates from prescription drug manufacturers are passed through to enrollees.

Notably, the report does not extensively discuss the impact of the program on affordability for the subsidized population, which constituted over 75 percent of the Colorado exchange market in 2019. However, the report does note briefly that subsidized members who remain in their current plans (i.e., who do not switch to a public option plan) will see an increase in their net premiums.

Evidence suggests that the state’s approach of including multiple public option plans in each market, rather than one carrier, would minimize net premium discounts for the subsidized population and, in some cases, cause them to pay more. This phenomenon, which the state is currently observing in its implementation of its recently enacted reinsurance program, is due to the subsidy impact of reducing the spread between the lowest and second lowest cost silver tier plans in the market.

Benefits. Public option plans will be ACA-compliant qualified health plans (QHPs), which are required to cover essential health benefits (EHBs). The state indicated that it will require plans to provide a greater set of high-value primary and preventive care services to enrollees on a pre-deductible basis. The state is also seeking to incentivize high-value care, and disincentivize low-value care; however, the details of these parameters will need to be specified in subsequent implementation guidance. Interestingly, Wakely assumes that any change in claim cost due to value-based insurance design will be immaterial.

The state plans to re-invest pass-through savings, estimated to total approximately $88.8 million, into providing additional benefits, such as adult dental coverage. That policy is projected to cost about $65 million dollars or roughly 73 percent of projected pass-through savings. Of note, Wakely suggests that “pent up” demand for dental services will increase premiums to equal the current maximum premiums for Stand Alone Dental Plans.

Under Wakely’s hypothetical scenario, the remaining 27 percent of savings will be used to fund a cost-sharing wrap to assist individuals who enroll in a silver metal level plan on the Exchange. This added subsidy will cover additional cost-sharing for members between 200 and 250 percent FPL and add new cost-sharing assistance for members between 250 and 400 percent FPL.

It’s important to note that these allocations off pass-through funding are for illustrative purposes only. The fact that the state plan relies on a federal waiver to obtain benefits for the subsidized population is a critical consideration as it moves forward with specifying details of the program.

With support from Arnold Ventures