Summary of Standardized Health Benefit Plan Colorado Option

Summary of Standardized Health Benefit Plan Colorado Option

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During the 2021 legislative session, Democratic Governor Jared Polis signed the Standardized Health Benefit Plan Colorado Option (Colorado Option) (House Bill 21-1232) into law. While the new law stops short of establishing a state-administered public option program, it provides the Colorado Division of Insurance (DOI) with various regulatory levers to increase access to affordable health coverage. Most notably, insurance carriers will be required, beginning in plan year 2023, to offer the standardized health benefit plan with mandatory premium reductions in the individual and small group markets.

Under the enacted legislation, carriers must reduce premiums by five percent, as adjusted for inflation, in each of the first three plan years in which the standardized plan is offered, resulting in a 15 percent premium reduction by 2025. If at any point carriers are unable to meet premium reduction requirements or network adequacy requirements, DOI is authorized to establish, through public hearings, and implement the necessary reimbursement rates for hospitals to achieve savings targets.

Regarding next steps, DOI must establish, through rulemaking, the standardized health benefit plan by January 1, 2022.

Standardized Health Benefit Plan

The law requires DOI to establish, through rulemaking by January 1, 2022, the standardized health plan to be offered by insurance carriers through the Exchange (i.e., Connect for Health Colorado; individual and small group markets) and through the Public Benefit Corporation (individual market).[1] The standardized health benefit plans must offer coverage at the gold, silver, and bronze levels and include, at a minimum, all pediatric and other essential health benefits required by the Affordable Care Act (ACA). 

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.

Insurance Carrier Participation Requirements

At a minimum, an insurance carrier is required to offer the standardized plan in each county and market (individual and/or small group) that the carrier operates in, beginning January 1, 2023. DOI may update the standardized plan annually through rulemaking that entails a stakeholder engagement process.

The insurance carrier 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. If a carrier seeks to offer coverage in a county in which the carrier did not operate in 2021, the carrier must offer the standardized health benefit plan at a premium that is at least five percent less than the average rate for that market. 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.

Likely as an attempt to minimize market disruption and premium costs for non-standardized plans, the law requires the Insurance Commissioner to disapprove a requested rate increase for a non-standardized plan if the increase is due to the insurance carrier shifting costs from the standardized plan to the non-standardized plan in order to meet the premium reduction requirements.

Provider Network Adequacy Requirements

The standardized plan must have a network that 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. Carriers must also include a majority of the “essential community providers” (ECP) in its network (similar to the ACA’s ECP standard for qualified health plan (QHP) issuers) and pursue “efforts to construct a diverse, culturally responsive network.”  If a carrier is unable to meet the network adequacy requirements, the carrier must file an action plan with DOI that details how the carrier will come into compliance. DOI must issue, through rulemaking, the network adequacy requirements and the action plan requirements.

Procedures to Resolve Reimbursement Disputes and Carrier Participation Issues

The law prescribes procedures for resolving issues relating to carrier participation and provider network adequacy:

• Nonbinding Arbitration – If a carrier or health care provider anticipates that the carrier will be unable to meet the network adequacy standards or the premium rate requirement due to a reimbursement rate dispute, the carrier or health care provider may enter into nonbinding arbitration to resolve the dispute. The carrier is still obligated to submit its rate filing by the deadline. At this point, the carrier may, or may not, submit a rate filing that meets the network adequacy standards or the premium rate requirements.

  If a carrier is unable to offer a standardized health benefit plan, the carrier must notify DOI of the reasons why the carrier is unable to meet the network adequacy standards or premium requirements by May 1, 2022 for plan year 2023. For plan year 2024 and subsequent years, the carrier must notify DOI by March 1 of the preceding year. The carrier is still obligated to submit its rate filing by the deadline. Presumably, at this point, the carrier may submit a rate filing that does not comply with the premium rate requirement or network adequacy standard.

•  Public Notice and Hearing – If, on or after January 1, 2023, (1) the carrier is unable to offer a standardized health benefit plan, or (2) DOI determines that the carrier has not met the premium rate requirements, then DOI will convene a public hearing at which the Insurance Commissioner will determine the additional measures necessary to facilitate approval of the carrier’s final rates.

  The Insurance Commissioner must consider the following factors into their decision:

  • Evidence and testimony from all involved parties – including carriers, hospitals, health care providers, and consumer advocacy organizations;

  • Any actuarial differences between the standardized plan and the health benefit plans the carrier offered in plan year 2021;

  • Any changes to the standardized plan;

  • State or federal health benefit coverage mandates implemented after the 2021 plan year;

  • Exemption for carriers that file an action plan. A carrier that files an action plan detailing how it will come into compliance with the network adequacy requirements will be considered compliant with those requirements; and

  • Exemption for health care coverage cooperatives that have achieved and maintain premium rate reductions of at least 15 percent. A health care coverage cooperative, and a carrier participating in a health care coverage cooperative agreement, that has achieved and maintained at least 15 percent reduction in premiums, “regardless of the first year the health benefit plans were offered,” will be considered compliant with the premium rate reduction requirements. Of note, the nonspecific timeline for when the premium rate reduction must have been achieved provides broad leeway to health care coverage cooperatives. For example, the premium rate reduction could have been achieved over a single year or multiple years.

 As discussed below, the Insurance Commissioner must consult with the newly established advisory board. The Insurance Commissioner may also consult with health care trade associations and consider the expenses of hospitals and health care providers (e.g., wages, benefits, staffing, training) needed to provide continuous quality care.

Regulatory Levers to Promote Affordability and Accessibility

Through the public hearing process, the Insurance Commissioner may decide additional cost-control measures must be implemented in order to approve a carrier’s rate filing. The law authorizes the Insurance Commissioner to:

• Establish reimbursement rates and require certain hospitals and health care providers to accept such rates. These reimbursement rates only apply to hospitals or health care providers that “prevented a carrier from meeting the premium rate requirements for a standardized plan being offered in a specific county; or caused the carrier to fail to meet network adequacy requirements.”

  The new authority, if exercised, would alter the negotiation dynamics between hospitals, and health care providers, and insurance carriers. Essentially, hospitals and health care providers that wish to contract with an insurance carrier will have to accept the negotiated reimbursement rate, presumably lower due to premium rate reduction, or the reimbursement rates set by the Insurance Commissioner. As discussed below, the law sets guardrails to prohibit the reduction of reimbursement rates by more than 20 percent from the 2021 plan year.

• Impose penalties on a hospital that refuses to participate in a standardized health benefit plan if required to do so. The Insurance Commissioner is permitted to take the following enforcement actions: (1) issue a warning; (2) levy a fine up to $10,000 per day for the first 30 days of noncompliance and up to $40,000 per day for each subsequent day of noncompliance; and (3) suspend or impose conditions on the hospital’s license. The hospital’s financial circumstances will be taken into account to determine the appropriate fine or action.

• Require carrier participation in markets with limited competition – The Insurance Commissioner may require a carrier to offer the standardized plan in specific counties and markets where no carrier is offering the standardized plan that year. The Commissioner must consider (1) the carrier’s structure and the number of covered lives; and (2) alternative health care coverage available in each county. The Commissioner must promulgate rules to ensure that there is not an unfair competitive advantage for carriers that intend to offer the standardized plan in a county where it has not previously offered plans.

 Additionally, the law provides guardrails to premium and reimbursement rate reduction:

•  Limit on reimbursement rate reduction – The Insurance Commissioner is prohibited from setting a reimbursement rate that is 20 percent lower than the negotiated rate for the previous plan year; and

• Appeal process – An insurance carrier or health care provider is permitted to appeal the Commissioner’s decision to the district court in their jurisdiction.

 New Entities: Advisory Board and Insurance Ombudsman

 The law establishes an advisory board that will advise the Insurance Commissioner with decisions at public hearings. In addition, the advisory may:

• Consider recommendations to streamline prior authorization and utilization management processes for the standardized plan;

• Recommend ways to keep health care services in the communities where patients live; and

• Consider whether alternative payment models may be appropriate for particular services, accounting for the impact of these models on health outcomes for people of color.

 The advisory board will be composed of up to 11 members appointed by the governor by July 1, 2022. The governor is directed to appoint a diverse membership “with regard to race, ethnicity, immigration status, age, ability, sexual orientation, gender identity, and geography” as well as experience and expertise, such as in health equity and health benefits for small businesses.

Additionally, the law creates the Office of the Insurance Ombudsman, which will be tasked with advocating for consumer interests related to access to and affordability of the standardized health benefit plan. The ombudsman’s responsibilities include evaluating data to assess the standardized plan’s network and affordability and representing the interests of consumers in public hearings.

Federal Waiver Authority

The law directs, but does not require, the Commissioner to submit an application to waive certain requirements of Section 1332 of the Affordable Care Act (ACA) to secure the applicable savings as a result of implementing the standardized plan, referred to as pass-through funding.  

Upon approval of the waiver by the Centers for Medicare and Medicaid Services (CMS), the law specifies that the Commissioner may use the savings for Colorado’s reinsurance program, administered by the Colorado Health Insurance Affordability Enterprise, which was established in the 2020 legislative session (Senate Bill 20-215). Savings must be used to increase the value, affordability, quality, and equity of health care coverage for all Coloradans, and will be deposited to the newly created Health Insurance Affordability Case Fund.

Oversight and Transparency

The Insurance Commissioner is required to submit several reports on a periodic basis regarding implementation of the standardized health benefit plans.

* Required for Insurance Commissioner to report during hearings conducted pursuant to the State Measurement for Accountable, Responsive, and Transportation (SMART) Government Act

Implementation: Start-Up Funding and Rulemaking

Roughly $1.4 million for the 2021-22 state fiscal year is appropriated for implementation of standardized health benefit plans. With regard to next steps, DOI must establish, through rulemaking, the standardized health benefit plan by January 1, 2022. DOI must also promulgate rules on the following:

• Provider network adequacy requirements and action plan;

• Requirements to ensure an insurance carrier does not face an “unfair competitive advantage” if it choose to offer a standardized plan in a market in a county where it has not previously operated or with a hospital with which the carrier has not previously contracted with; and

• Requirements to align with federal program requirements.

With support from Arnold Ventures

Summary of House-Approved Standardized Health Benefit Plan Colorado Option

Summary of House-Approved Standardized Health Benefit Plan Colorado Option

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On May 10, 2021, the Colorado House of Representatives approved the Standardized Health Benefit Plan along party lines. The bill largely resembles the strike-below amendment that was adopted on April 27 (summary here), which requires carriers to offer the standardized plan with mandatory premium reductions.

Under the bill, carriers must reduce premiums by six percent in each of the first three plan years in which the standardized plan is offered, resulting in an 18 percent premium reduction by 2025. If at any point carriers are unable to meet premium reduction requirements or network adequacy requirements, the Commissioner of Insurance is authorized to establish the necessary reimbursement rate for hospitals to achieve the desired savings through a public hearing process. The base rate will be set at no less than 155 percent of Medicare rates and increases in the base rate will be provided to certain critical access hospitals and efficient hospitals.

Thirty-five amendments were offered on the bill, with all Republican-offered amendments being defeated. Amendments of note include:

• Requiring a study to examine the bill’s impact on provider workload;

• Establishing an “equivalent rate” between Medicare and Medicaid for pediatric specialty hospitals;

• Allowing insurance carriers and providers to appeal decisions made through the public hearing process; and

• Promulgating rules to ensure new insurance carriers do not gain an unfair advantage when entering a new county.

The bill now heads to the Senate for consideration.

Standardized Health Benefit Plan

The bill would require the Commissioner of Insurance to establish a standardized health plan, to be offered by carriers in the individual and small group markets and include coverage at the gold, silver, and bronze levels, by January 1, 2023. The standardized plan is to be developed through a stakeholder engagement process and include, at a minimum, all the essential health benefits required by the Affordable Care Act. 

The stakeholder engagement process must also address how the standardized plan will improve racial health equity and decrease racial health disparities. The bill dictates that the standardized plan must provide first-dollar, pre-deductible coverage for certain high-value services that are identified collaboratively with consumer stakeholders that reduce disparities in health outcomes.

Carrier Participation and Requirements

The bill requires individual health benefit plans and small group health benefit plans to offer the standardized plan in each county where the carrier currently operates in those markets, beginning January 1, 2023. Insurance carriers must meet a six percent premium reduction in each of the first three years of offering the standardized plan, resulting in an 18 percent premium reduction in plan year 2025 compared to plan year 2021.

Additionally, the standardized plan must have a network that is no 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 and is culturally responsive to the enrollees it serves.  Carriers must also include a majority of essential community providers and a description of efforts to construct a diverse, culturally responsive network. 

In determining whether a carrier is required to offer the standardized plan in a specific county, the Commissioner will consider 1) the carrier’s structure and the number of covered lives; and 2) alternative health care coverage available in each county. Additionally, the Commissioner is direct to promulgate rules to ensure that there is not an unfair competitive advantage for carriers that intend to offer the standardized plan in a country where it has not previously offered plans.

Failure to Meet Premium Requirements

If carriers believe they will not be able to meet network adequacy standards or the premium rate reductions due to a reimbursement dispute, the carrier or health care provider may enter into nonbinding arbitration prior to rate filing.

Public Hearing to Establish Reimbursement Rates

If carriers notify the Commissioner that they are unable to meet premium reductions, or if the Commissioner determines that the carrier has not met the premium or network adequacy requirements, the Division will hold a public hearing prior to approval of the carrier’s final rates. All involved parties, including carriers, hospitals, health care providers, consumer advocacy organizations, and individuals will present evidence regarding network adequacy and premium rate requirements.

Following the hearing and based on the evidence presented, the Commissioner may establish carrier reimbursement rates under the standardized plan for hospital services in order to meet the premium rate requirements or network adequacy standards. The base rate will be set at no less than 155 percent of Medicare rates and the following types of hospital receive an increase from the base:

• 20 percent increase for a hospital that is an essential access hospital or that is independent and not part of a health system;

• 40 percent increase for a hospital that is an essential access hospital and is not part of a health system;

• 30 percent increase for a hospital with a combined percentage of patients who receive Medicaid that exceeds the statewide average;

• 40 percent increase for a hospital that is efficient in managing the underlying costs of care as determined by the hospital’s total margins, operating costs, and net patient revenue.

• 55 percent increase for a hospital that is a pediatric specialty hospital with a level one pediatric trauma center.

After the determination of reimbursement rates, the Commissioner may require a health care provider to participate in the standardized plan and accept the reimbursement rate. The Commissioner will first issue a warning to such providers that do not participate and then a fine not to exceed $5,000 if non-compliance persists. Additionally, carriers and provider may appeal the decision by the Commissioner to the district court.

Waiver Authority

The bill directs the Commissioner to submit an application to waive certain requirements of Section 1332 of the Affordable Care Act (ACA) to secure the applicable savings as a result of implementing the standardized plan, referred to as pass-through funding.  

Upon Centers for Medicare and Medicaid Services (CMS) waiver approval, the bill specifies that the Commissioner may use the savings for: 1) the establishment of the Colorado Option Authority; and 2) to increase the value, affordability, quality, and equity of health care coverage for all Coloradans. The bill notes that the implementation of the Authority is contingent upon Section 1332 waiver approval.

Prohibition on Cost-Shifting

The bill details that the Commissioner is permitted to disapprove a requested rate increase if the rate filing is incomplete or the rate filing reflects a cost shift between the standardized plan and the health benefit plan for which rate approval is being sought.

Reports

The Commissioner is directed to contract with a third party to prepare three reports that examine the implementation of the standardized plan. The first report is due July 1, 2023; the second by July 1, 2024; and the final report is due July 1, 205. The reports must examine how implementation affects staffing, wages, benefits, training, and work conditions and workload of hospital workers.

Summary of Colorado Option Health Benefit Plan Amendment

Summary of Colorado Option Health Benefit Plan Amendment

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On April 27, 2021, the Colorado House Health and Insurance Committee adopted an amendment to the Colorado Option Health Benefit Plan that eliminates the establishment of a public option plan. While the initial bill would have created a state-administered public option if insurance carriers failed to meet premium reduction targets, the amendment instead requires carriers to offer the standardized plan with mandatory premium reductions.

Under the amendment, carriers must reduce premiums by six percent in each of the first three plan years in which the standardized plan is offered, resulting in an 18 percent premium reduction by 2025. If at any point carriers are unable to meet premium reduction requirements or network adequacy requirements, the Commissioner of Insurance is authorized to establish the necessary reimbursement rate for hospitals to achieve the desired savings through a public hearing process. The base rate will be set at no less than 155 percent of Medicare rates and increases in the base rate will be provided to certain critical access hospitals and efficient hospitals.

The bill now heads to the House Appropriations Committee for consideration.

Standardized Health Benefit Plan

The bill would require the Commissioner of Insurance to establish a standardized health plan, to be offered by carriers in the individual and small group markets and include coverage at the gold, silver, and bronze levels, by January 1, 2023. The standardized plan is to be developed through a stakeholder engagement process and include, at a minimum, all the essential health benefits required by the Affordable Care Act. 

The stakeholder engagement process must also address how the standardized plan will improve racial health equity and decrease racial health disparities. The bill dictates that the standardized plan must provide first-dollar, pre-deductible coverage for certain high-value services that are identified collaboratively with consumer stakeholders that reduce disparities in health outcomes.

Carrier Participation and Requirements 

The bill requires individual health benefit plans and small group health benefit plans to offer the standardized plan in each county where the carrier currently operates in those markets, beginning January 1, 2023. Insurance carriers must meet a six percent premium reduction in each of the first three years of offering the standardized plan, resulting in an 18 percent premium reduction in plan year 2025 compared to plan year 2021.

Additionally, the standardized plan must have a network that is no 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 and is culturally responsive to the enrollees it serves.  Carriers must also include a majority of essential community providers and a description of efforts to construct a diverse, culturally responsive network. 

Failure to Meet Premium Requirements

If carriers believe they will not be able to meet network adequacy standards or the premium rate reductions due to a reimbursement dispute, the carrier or health care provider may enter into nonbinding arbitration prior to rate filing.

Public Hearing to Establish Reimbursement Rates

If carriers notify the Commissioner that they are unable to meet premium reductions, or if the Commissioner determines that the carrier has not met the premium or network adequacy requirements, the Division will hold a public hearing prior to approval of the carrier’s final rates. All involved parties, including carriers, hospitals, health care providers, consumer advocacy organizations, and individuals will present evidence regarding network adequacy and premium rate requirements.

Following the hearing and based on the evidence presented, the Commissioner may establish carrier reimbursement rates under the standardized plan for hospital services in order to meet the premium rate requirements or network adequacy standards. The base rate will be set at no less than 155 percent of Medicare rates and the following types of hospital receive an increase from the base:

• 20 percent increase for a hospital that is an essential access hospital or that is independent and not part of a health system;

• 40 percent increase for a hospital that is an essential access hospital and is not part of a health system;

• 30 percent increase for a hospital with a combined percentage of patients who receive Medicaid that exceeds the statewide average; and

• 40 percent  increase for a hospital that is efficient in managing the underlying costs of care as determined by the hospital’s total margins, operating costs, and net patient revenue.

After the determination of reimbursement rates, the Commissioner may require a health care provider to participate in the standardized plan and accept the reimbursement rate. The Commissioner will first issue a warning to such providers that do not participate and then a fine not to exceed $5,000 if non-compliance persists.

Waiver Authority

The bill directs the Commissioner to submit an application to waive certain requirements of Section 1332 of the Affordable Care Act (ACA) to secure the applicable savings as a result of implementing the standardized plan, referred to as pass-through funding.  

Upon Centers for Medicare and Medicaid Services (CMS) waiver approval, the bill specifies that the Commissioner may use the savings for: 1) the establishment of the Colorado Option Authority; and 2) to increase the value, affordability, quality, and equity of health care coverage for all Coloradans. The bill notes that the implementation of the Authority is contingent upon Section 1332 waiver approval.

Prohibition on Cost-Shifting

The bill details that the Commissioner is permitted to disapprove a requested rate increase if the rate filing is incomplete or the rate filing reflects a cost shift between the standardized plan and the health benefit plan for which rate approval is being sought.

Reports

The Commissioner is directed to contract with a third party to prepare three reports that examine the implementation of the standardized plan. The first report is due July 1, 2023; the second by July 1, 2024; and the final report is due July 1, 205. The reports must examine how implementation affects staffing, wages, benefits, training, and work conditions of hospital workers.

With Support from Arnold Ventures

Summary of Colorado Option Health Benefit Plan

Summary of Colorado Option Health Benefit Plan

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On March 18, 2021, the Colorado General Assembly introduced the Colorado Option Health Benefit Plan, which would require health insurance carriers in the Exchange market to meet aggressive cost reduction targets. If carriers fail to meet those targets, the legislation authorizes creation of a state-run health insurance option in which providers are required to participate at administered prices. This approach reflects a significant shift from the approach outlined in the previous iteration of the bill, the Colorado Affordable Health Care Option Act, which relied on commercial insurance carriers.

More specifically, the bill initially requires insurance carriers to achieve a 20 percent premium reduction rate by plan year 2024 and have at least two carriers offer the Colorado Option in every zip code. However, if these performance thresholds are not met, the state will establish the Colorado Option Authority to administer the public option state-wide. This phase of the bill permits the state to mandate provider participation at government set rates in order to achieve the desired health care cost savings. To support the financing of such a program, the bill also directs the state to pursue a federal section 1332 waiver for pass through funding.

While insurance carriers have two years to achieve the necessary premiums reductions, it is more likely that Colorado will be administering its own public option in 2025. Under a state-affiliated public option plan, Colorado can more directly improve consumer affordability by imposing provider rates that reduce premiums and out-of-pocket spending, as well as improve access to care in rural areas.

Standardized Health Benefit Plan

10-16-1304 – Authority –The bill would require the Commissioner of Insurance to establish a standardized health plan, known as the Colorado Option, to be offered by carriers in the individual and small group markets and include coverage at the gold, silver, and bronze levels, by January 1, 2022. The Colorado Option is to be developed through a stakeholder engagement process and include, at a minimum, all the essential health benefits. 

The stakeholder engagement process must also address how the Colorado Option will improve racial health equity and decrease racial health disparities. The bill dictates that the Colorado Option must provide first-dollar, pre-deductible coverage for certain high-value services that are identified collaboratively with consumer stakeholders that reduce disparities in health outcomes.

The Commissioner is to offer the Colorado Option in manner that allows consumers to easily compare the standardized plans offer by each carrier. The Commissioner is also permitted to update the Colorado Option annually through the stakeholder process outlined below.

10-16-1305 – Carrier requirements – The bill details that beginning January 1, 2023, all carriers who offer an individual health benefit plan or small group health benefit plan in Colorado are encouraged, not required, to offer a standardized plan in each of the zip codes where the carriers offer individual and small group plans.

By January 1, 2024, at least two carriers must offer the Colorado Option in the individual and small group markets in each zip code in the state. The bill states that a health care coverage cooperative could be considered one of the two carriers for that zip code.

For plan year 2024, carriers who offer the Colorado Option are directed to offer a premium rate that is at least 10 percent less than the premium offered for the 2021 calendar year for the individual market. For plan year 2025, carriers should aim to offer a premium rate that is at least 20 percent less than the premiums offered in 2021. The Commissioner is directed to calculate the premium rate reduction based on the rates charged in the same county in which the carrier offered the individual plans in 2021, prior to the application of the state reinsurance program.

For plan years 2025 and beyond, carriers offering the Colorado Option are encouraged to limit annual premium rate increase by a rate that is no more than the maximum of the consumer price index for all urban consumers plus one percent.

Colorado Option Authority

The bill establishes the Colorado Option Authority, a nonprofit, unincorporated public entity. The purpose of the Authority is to operate as a carrier of the standardized plan for individuals and small employers if carriers of the state fail to meet the premium reduction goals of 10 and 20 percent by 2023 and 2023, respectively, or in the event that there are not two carriers offering the standardized plan in every zip code by 2025. The Authority would be required to implement provider reimbursement fee schedule established by the act for services covered by the standardized option.

The bill also establishes the Colorado Option Authority Board, which is to consist of nine members and is directed to determine the development, governance, and operation of the Authority. Members would be appointed by the Governor.

Provider Fee Schedule

The bill directs the Commissioner to establish a provider reimbursement fee schedule for health care services that are covered by the Colorado Option. The fee schedule would apply to hospitals, health care providers, pharmacies, and all other providers provides services to Colorado Option enrollees.

The bill dictates that the reimbursement rates should be set to achieve at least a 20 percent premium reduction in 2025 plan year and ensure that the premiums do not increase past the rate of inflation for plan years 2026 and beyond.

Under the act, providers are required to accept all enrollees of the Colorado Option. Additionally, providers are not permitted to balance bill enrollees and are required to accept the feed specified in the fee schedule established by the Commissioner.

In the event that the Colorado Option Authority is established, the bill also requires the establishment of an Advisory Committee to make recommendations to the Authority Board concerning the development, implementation, and operation of the Colorado Option. The Committee is directed to give special consideration to Coloradans with low incomes and to communities of color.

Waiver Authority

The bill directs the Commissioner to submit an application to waive certain requirements of Section 1332 of the Affordable Care Act (ACA) to secure the applicable savings as a result of implementing the Colorado Option.

Upon Centers for Medicare and Medicaid Services (CMS) waiver approval, the bill specifies that the Commissioner may use the savings for: 1) the establishment of the Colorado Option Authority; and 2) to increase the value, affordability, quality, and equity of health care coverage for all Coloradans. The bill notes that the implementation of the Authority is contingent upon Section 1332 waiver approval.

Rate Filing Regulation

The bill details that the Commissioner is permitted to disapprove a requested rate increase if the rate filing is incomplete or the rate filing reflects a cost shift between the Colorado Option and the health benefit plan for which rate approval is being sought.

Power and Duties of the Board

The board is granted the authority to consider the affordability and cost in purchasing health care, as well as investigate the requirements to ensure that the best interests of Coloradans are protected. Additionally, the Bord is to conduct a survey of those individuals who enrolled in the public option to assess the purchasing experience and whether the Colorado Option addresses health equity and health disparity issues.

Grounds for Disciplinary Action

The bill also adds that following providers are subject to disciplinary action if they: 1) do not accept consumers who are enrolled in any health plan offered by the authority; or 2) balance bill consumers enrolled in the Colorado option or refuse to accept the fee schedule established by the Commissioner:

• Acupuncturists,

• Athletic trainers,

• Audiologists,

• Chiropractors,

• Midwives,

• Hearing aid providers,

• Massage therapists,

• Medical practice providers,

• Mental health providers,

• Nurses and nurse aides,

• Nursing home administrators,

• Occupational therapist and occupational therapy assistants,

• Optometrists,

• Physical therapists and physical therapist assistants, and

• Podiatrists.

The bill also requires that all health facilities that provide services covered under the Colorado Option are to accept consumers who are enrolled in the option, shall not balance bill such consumers, and must accept the fee specified in the fee schedule. The Department may suspend, revoke, or impose conditions on a facility’s license for noncompliance of these requirements.

Safety Clause

The general assembly deems that this act is necessary for the immediate preservation of public peace, health, or safety.

Summary of House Committee on Health & Insurance Markup of the Colorado Affordable Health Care Option Act

Summary of House Committee on Health & Insurance Markup of the Colorado Affordable Health Care Option Act

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On Wednesday, March 11, 2020, the House Committee on Health & Insurance favorably referred the Colorado Affordable Health Care Option Act (House Bill 20-1349), as amended, to the House Committee on Appropriations by a vote of 7-4. A summary of the original bill is available here. Below is a summary of the substantive changes:  

Colorado Option Plan Required Components

• Requires the Advisory Board’s approval for the Colorado Division of Insurance (DOI) to require carriers to offer the Colorado Option in specific counties in order to ensure there are at least two carriers offering the Colorado Option in each county.

• States that a licensed health care coverage cooperative that is operating in a county is considered one of the two required carriers for that county. Therefore, DOI is required to exempt a carrier from offering the Colorado Option in that specific county. A health care coverage cooperative is defined as “an entity that provides to its members health coverage and health care purchasing services, including but not limited to detailed information on comparative prices, usage, outcomes, quality, and member satisfaction with provider networks.”

• Allows DOI to expand the Colorado Option to the small group market, contingent on the Advisory Board’s approval, beginning July 1, 2024 instead of January 1, 2023.

• Requires DOI to report the findings of its evaluation of the effects of the Colorado Option on the individual market, among other aspects, at a public meeting of the Advisory Board, in addition to the House and Senate committees of jurisdiction.

Hospital Participation and Reimbursement

• Eliminates DOI’s authority to deny carrier rate filings for a plan in any market that “reflect a cost shift” between the Colorado Option and that plan. This change takes away a critical tool from DOI to counter the potential that hospitals will increase their prices in other markets to recoup any losses they may experience due to the Colorado Option.

• Clarifies the definition of “Medicare reimbursement rates” by adding the following: “For a hospital that is reimbursed through the Medicare prospective payment system, the Medicare reimbursement rate is based on the prospective payment system rates. For a critical access hospital, the Medicare reimbursement rate is based on allowable costs as reported in Medicare cost reports and the historical cost-to-charge ratios for the specific hospital.”

• Requires DOI when implementing the hospital reimbursement rate formula to consult with “a statewide multi-specialty association representing physicians” instead of “hospital-based health care providers in Colorado.”

• Allows DOI, in consultation with the Colorado Department of Health Care Policy and Financing (HCPF) and the Advisory Board, to exempt a hospital from or change the hospital reimbursement rate formula if the hospital: (1) demonstrates that the assigned hospital reimbursement rate will require the hospital to reduce its current level of services; or (2) is negotiating a contract in good faith with a licensed health care coverage cooperative to set reimbursement rates.

• Allows, rather than requires, DOI to fine a hospital that refuses to participate in the Colorado Option.

With support from Arnold Ventures

Summary of the Colorado Affordable Health Care Option Act

Summary of the Colorado Affordable Health Care Option Act

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On March 5, 2020, the Colorado legislature introduced the Colorado Affordable Health Care Option Act. While the legislative text mirrors in many ways the plan submitted to the state legislature by the Colorado Department of Health Care Policy and Financing (HCPF) and the Colorado Division of Insurance (DOI), it includes new details not present in any preceding materials. We focus primarily on this new information below.  

Advisory Board

The bill would establish the Colorado Option Advisory Board for the purpose of making recommendations to develop, implement, and operate the Colorado Option. The board would consist of nine voting members. The governor would be responsible for appointing four non-legislative members; two who represent consumers with the highest barriers to accessing health care, one with expertise in providing health care to low income individuals, and one who has expertise in health care finance. Members of the legislature would be responsible for selecting four additional members with experience in value-based purchasing, rural health care, and hospital administration.

The Advisory Board would advise on any federal waiver required for pass-through funding to increase premium subsidies, in addition to the timing and feasibility of offering the Colorado Option on the small group market, and value-based payments and plan design. Of note, the Advisory Board would have the authority to override any DOI decision on the development, implementation, and operation of the Colorado Option, by a vote of at least seven members.

Colorado Option Plan Required Components

Beginning January 1, 2022, insurance carriers that offer an individual health plan would be required to offer the Colorado Option in the individual market in each county where carriers offer individual plans. In the case that a county only has one carrier, DOI may require carriers to offer the Colorado Option Plan in specific counties where they are not currently present. DOI would consider each carrier’s structure and the number of lives covered in each county, as well as alternative health care coverage available in each county, before requiring carriers to participate in specific areas.

The Colorado Option would provide first-dollar, pre-deductible coverage for primary care and behavioral health care, in addition to the essential health benefits. Carriers would be required to reimburse hospitals for inpatient and outpatient services based on the established formula and ensure that eighty-five percent of premiums collected are spent on patient care. The legislation would also require carriers to reduce premiums by the amount equal to all of the manufacturer rebates they receive for managing prescription drug benefits covered by the Colorado Option in the previous plan year.

The legislation would direct DOI to adopt several rules including a rule to better ensure the premium amount for silver plans are based on the true actuarial value of silver plans, and a rule to increase the affordability of the Colorado Option for individuals and families whose income is up to four hundred percent of the federal poverty line (i.e., the subsidized population).

Beginning January 1, 2023 (i.e., the second year of the program), the bill would allow DOI to expand the Colorado Option to the small group market, contingent on the Advisory Board’s approval. In order for implementation for the small group market to begin in PY 2023, the Board would need to vote immediately following program launch in the individual market. For purposes of the small group market, the bill would allow DOI to deem a purchasing cooperative – such as the PEAK Alliance – as a qualified Colorado Option plan.

DOI would be required to publish evaluation reports examining the effect of the Colorado Option on the individual market and any cost-shifting effects among markets. The report would also examine provider network adequacy and, importantly, the effect of the plan on the subsidized population. The bill also requires HCPF and DOI to recommend the majority of any pass-through funding received through the Colorado Option be dedicated to increasing affordability for the subsidized population.

Hospital Participation and Reimbursement

As expected, the legislation establishes a mandate that hospitals participate in the Colorado Option. The Colorado Department of Public Health and Environment is afforded the authority to suspend or revoke the license of a hospital that does not participate and would be able to impose fines of up to $50,000 per day for failure to participate.

DOI would develop a formula to set “reasonable carrier” reimbursement rates for inpatient and outpatient services. The intent of these rates – as written in the bill – would be to lower premiums and enrollee out-of-pocket costs, as well as to improve access to care in rural areas. As expected, rates would be based on a percentage of what Medicare pays for equivalent services.

Of interest, the bill would pre-establish reimbursement rates for plan years (PY) 2022 and 2022, starting at 155 percent of Medicare . DOI could further adjust this base rate according to certain hospital characteristics, as alluded to in other materials recently released by Colorado (see here) and outlined below.

Beginning PY 2024, DOI could then determine the base reimbursement rate and adjustment factors for hospitals. In doing so, the bill specifies that DOI must consult unions representing health care systems in Colorado to ensure reimbursement rates can support the cost of hospital wages, benefits, staffing, and training for staff.

Importantly, the bill would allow the DOI to modify the reimbursement rate or exempt a hospital from it entirely if a hospital that demonstrates the rate would have an adverse effect on its financial sustainability.

To counteract the potential that hospitals will increase their prices in other markets to recoup any losses they may experience due to the Colorado Option, DOI is required to deny carrier rate filings for a plan in any market that “reflect a cost shift” between the Colorado Option and that plan, taking into account the total cost of health care.

With support from Arnold Ventures

Summary of Colorado's Public Option Law

Summary of Colorado’s Public Option Law

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In May 2019, Colorado enacted a public option law (House Bill 19-1004) requiring Governor Jared Polis’s administration to develop a proposal for a state option for more affordable, high-value coverage. Unlike Washington state’s public option law, which details the roles of the state government and private health insurers and sets a cap on provider reimbursement rates, HB 19-1004 delineates a roadmap and policy considerations to inform the administration’s development of Colorado’s public option program. Notably, the law does not set a deadline for implementation of the public option.

Whether HB 19-1004, on its own, authorized a public option program has been the subject of some debate among stakeholders in the state. At this point, however, the relevant state agencies have made clear they intend to pursue new legislative authority to implement their recommended approach in the 2020 legislative session.

Proposal Roadmap

HB 19-1004 requires the Department of Health Care Policy and Financing (HCPF), which administers Medicaid and other programs in the state, and the Division of Insurance (DOI) within the Department of Regulatory Agencies (DORA), which regulates private health insurers, to craft and submit a proposal to the Colorado General Assembly by November 15, 2019. HCPF and DOI are also required to present a summary of the proposal to the General Assembly before the start of the 2020 legislative session on January 8, 2020.

Under the law, the public option plan must: (1) leverage existing state health care infrastructure; (2) increase competition among private health insurers; and (3) improve access to high-quality, affordable health care. The proposal will be assessed according to its likelihood to meet these objectives, as well as its affordability to consumers, administrative and financial burden to the state, and ease of implementation.

In developing the proposal, HCPF and DOI are instructed to:

• Consider potential impacts on consumer costs, provider participation, insurer market stability, and other factors (see Table 1 for more details);

• Consult with the Colorado Health Benefit Exchange and collect feedback from stakeholders (public and private health insurance experts, consumers, consumer advocates, employers, providers, and insurers); and

• Identify statutory or rule changes necessary to implement the proposed state option.

After submitting and presenting the proposal, HCPF and DOI may apply for federal waivers or submit state plan amendments in order to fund and implement the proposed state option. For state fiscal years 2018-19 and 2019-20, the bill allocates a total of $225,000 to HCPF and $346,500 to DOI to conduct research, convene stakeholder meetings, and perform other activities necessary to develop the proposed state option.

With support from Arnold Ventures