Most Colorado Option health plans aren’t hitting cost-reduction target

Medical staff perform ambulatory surgery at Denver Health on March 15, 2023. Newly released data from the University of Colorado shows that, in total, patient care revenues from all Colorado hospitals increased by about $898 million from 2021 to 2022, while healthcare costs increased by $1.7 billion. dollar increased. hospital association. (Photo credit: RJ Sangosti/Denver Post)

Most health insurers say they can’t get their monthly premiums down to the levels required by the state’s Colorado Option next year, but as major hearings approach, insurers have set cost-cutting targets. Proponents believe the deal could be signed to bring it closer to

If no deal is reached, the state will force some hospitals to accept lower rates to reduce the cost of Colorado Option medical insurance, which is required to show a 10% reduction in 2024. there is a possibility.

Last year, insurers were not penalized for falling short of premium targets. So the hearings scheduled for this month will be the first test of whether the Colorado Option can meet the lawmakers’ goal of providing more affordable insurance plans. A lot of money is at stake for health insurers, hospitals and customers.

Although the law allows health insurers to file complaints against hospitals for failing to meet the Colorado Option’s goals, most health insurers would rather Either blames the states themselves for setting goals that are supposedly unattainable.

The Colorado Department of Health chose to file its own complaint against the hospital, which the hospital industry claims has no authority.

And while most hospitals take the position that they’re doing enough that they shouldn’t get into trouble between the state and insurers, one system says the insurers who filed complaints accused of

Aurora Democratic Rep. Iman Jode, one of the proponents of the Colorado Options bill, said he was not surprised that insurers didn’t hit their targets immediately next year.

“We’re going to face a profit argument,” she said. “Insurer profits are so prevalent in the United States that they create barriers to healthcare.”

The Colorado Option is a standardized insurance plan sold by a private company, created by legislation passed in 2021 after a failed push to create a true public option. Requires companies that sell health insurance in the personal market to offer plans that cover some services, such as mental health visits, at no out-of-pocket cost.

The plan’s monthly premium was set to drop by 5% in 2023. Few plans met their targets, but there were no penalties this year.

According to documents filed with the Colorado Department of Insurance, the premiums for the Colorado Option Plan were supposed to be 10% lower in 2024 than in 2021 after adjusting for inflation, but all plans it sells have that effect. Only the Denver Health Medical Plan met its goals.

The Department of Health plans to hold public hearings on the proposed tariffs from Tuesday through at least June 22nd. Colorado Insurance Commissioner Michael Conway could order hospitals to accept cuts from insurers if they determine rates are preventing them from meeting Colorado standards. Optional premium requirement.

An insurance agency representative declined to comment on the process.

The state has set a “floor rate,” the lowest rate at which hospitals can force admission. The floor is at least 165% of what Medicare pays for services, with higher rates for independent and rural facilities. However, a state cannot request a reduction of more than 20% in one year. For example, if a hospital received 200% of Medicare payments, in 2024 he can’t ask for less than 180%, even if the floor is lower. Insurance companies and hospitals can independently negotiate price reductions.

Only one company, Cigna Healthcare, blamed hospitals for failing to reduce premiums sufficiently, but the Department of Health found that about 20 hospitals had premiums too high, based on a commissioned analysis. filed a complaint as

The Colorado Hospital Association has disputed the accuracy of the analysis, saying the department has the right to file a complaint only if it identifies the hospital as the reason the insurer is unable to meet its premium reduction targets.

Tom Rennell, senior vice president of financial policy and data analytics at the Colorado Hospital Association, said he was surprised that the insurance department singled out hospitals when insurance companies didn’t.

He said insurers “pointed to many other aspects of the health care system and flaws in its target design,” including failing to consider health care financing challenges beyond 2021.

Rennell said he expects most hospitals and insurers to agree on rates near the minimum levels required by the state.

“It is still unclear whether it will be enough to meet the interest rate target under public options,” he said.

Adam Fox, deputy director of the Colorado Consumer Health Initiative, said while he agreed a settlement was likely, the insurer’s filings indicated that some hospitals would benefit from lowering the rates paid to them. said it had reached its target and suggested other hospitals were closer to it. He said the possibility of holding public hearings is a strong incentive to cut costs, as they are expensive to prepare and require more transparency than businesses would like.

“Traditional arguments about making markets work and making competition work have not cut costs,” he said.

Fox said he didn’t know how much effort companies had put in, as he blamed the shortages on state-adjusted trends, such as inflation in medical costs and more severe cases than before the pandemic.

“The fact that Denver Health continues to hit its targets and Cigna was able to hit it with the Silver Plan shows it can be done,” he said.

Six companies will sell health insurance in the private market in Colorado in 2024, including newcomer Select Health, which has partnered with hospital system Intermountain Health. The Denver-based Friday Health Plan won’t go on sale next year. Closed in 6 states where it currently operates.

In 2023, about 35,000 people, or 13% of retail market buyers, chose the Colorado Option Plan. Jode said he was happy with the steps Congress took this year to make plans easier to find and compare with other options. First year market share.

Here’s what each insurer said about their efforts to meet the Colorado Option’s requirements:

Signa

Cigna Healthcare reported in its filings with the insurance department that the Silver plan met the requirement for a 10% reduction in premiums, while the Gold and Bronze plans did not in five of the state’s nine regions. bottom.

Cigna accused the state of setting goals it considered unrealistic and Intermountain Health’s refusal to accept lower rates at three Denver-area hospitals.

In its filing, the province of Cigna said that by requesting a reduction in premiums for 2021, the province failed to take into account all the changes in healthcare after 2019.

“These conditions and other challenges identified in this story make it extremely difficult for any airline to meet the rate cuts required by the Colorado Public Option in 2024 (the planning year).” said the paper.

He also said Intermountain Health, which merged with Bloomfield-based SCL Health last year, denied lower rates at Good Samaritan Medical Center, Lutheran Medical Center and St. Joseph’s Hospital. It asked the Department of Insurance to order Intermountain to accept an interest rate near the floor specified by the Department.

In a filing, Intermountain argued that Cigna’s premium rates were already inadequate and that insurers could meet the requirements by pouring into the company’s profits, which it estimates to be about $6.7 billion in 2022. Health care system representatives declined to comment further, citing ongoing negotiations. .

The Department of Health has filed its own complaint, arguing that additional hospitals signed by Cigna should also reduce their rates. A state-commissioned analysis found that if rates were cut to the floor at six additional hospitals, Boulder County would see less than a 1% drop in premiums. By contrast, Weld County will see a decline of more than 15%, and the Denver area will see a more modest 2.6% decline. Two more plans available in Larimer and Weld counties qualify for the 10% reduction, as do the two plans sold in El Paso and Teller counties.

Kaiser Permanente

Kaiser Permanente Health Plans reported that none of the plans it sells have responded to the price reduction. The report noted that inflation, rising prescription drug costs, additional costs related to COVID-19, and illness among people covered by small-group health insurance will continue to rise.

Kaiser Permanente did not file a complaint with any hospital, but the Department of Health did. A state analysis found that Kaiser Permanente could cut premiums by about 5.9 percent if it negotiated rates near the floor set by the state with seven hospitals. However, this is not enough to meet rate requirements.

Last week, Kaiser Permanente and the hospital already cut premiums by 20% (the maximum the state can legally demand), or they are not in the network, meaning the insurer and the hospital have not agreed on premiums. submitted a statement. .

The health care system said in a statement on Friday that it was continuing to negotiate with hospitals to lower rates, but that the state’s target was too low because it did not properly account for inflation. Profit margin is estimated at about 1.5%.

“It is important that we provide an appropriate plan based on actuarial insurance and Kaiser Permanente cannot charge less than it costs to provide medical care,” the statement said.