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.