Colorado Insurance Commissioner Michael Conway met with a physician-specialty forum convened by CMS Monday, March 25, to discuss a bill currently under consideration by the Colorado General Assembly that is a priority of the commissioner and Gov. Jared Polis.
House Bill 19-1168, “The State Innovation Waiver Reinsurance Program,” would create a reinsurance program for Coloradans in the individual health insurance market. The program would provide reinsurance payments to health insurers to aid in paying high-cost insurance claims once an individual’s claims for the year reach a certain level (known as the “attachment point”) up to a cap determined by the commissioner.
“Reinsurance is absolutely a priority for the governor and the driving force is to figure out any way we can to reduce health care costs,” stated Commissioner Conway in his opening comments. While HB19-1168 will only affect the individual market, Commissioner Conway’s remarks provided an unvarnished view of his approach to controlling costs moving forward. “We’ve done a lot of what we can do on the insurance cost side, so there’s more of a focus on hospitals and providers now.”
“This type of funding model reduces the impact of the high-cost claims on the insurance pool,” the DOI stated in a news release. “That, in turn, will reduce Coloradans’ health insurance premiums in the individual market.”
The division commissioned an actuarial study to evaluate what premium decrease would result from the Colorado model for funding reinsurance, and to demonstrate the effectiveness of this model. The study found the expected reductions to the costs of medical claims could lead to a statewide decrease in individual health insurance premiums of nearly 23 percent, or approximately $250 million. The commissioner said that some areas of the state could see premium reductions upwards of 30 percent.
The program’s funding mechanism utilizes “Medicare reference-based pricing” to bring down health care costs by reducing what is paid to providers, meaning that providers are paid a percentage of what Medicare pays for services and the savings are passed to consumers through lower health insurance premiums. Commissioner Conway stated that, on average, outpatient care is currently being paid at 375 percent of Medicare and inpatient care is currently being paid at 200 percent of Medicare. “If you reduce this to 100 to 150 percent of Medicare, you can pull a lot of money out.”
While the bill as filed includes Medicare referenced-based pricing for physicians, amendments are anticipated on the floor of the House of Representatives to remove physician reimbursement cuts from the funding scheme and flesh out exemptions for hospitals that would be affected in an unsustainable way, such as rural hospitals unaffiliated with large systems.
Physician participants asked thoughtful questions about HB 19-1168 and other bills under consideration by the General Assembly, surfaced other pain points between providers and health plans, and shared strategies physicians are currently deploying to reduce health care costs. CMS will be analyzing House amendments to HB19-1168 to determine a Senate strategy on the bill.
Watch for more on the reinsurance bill as it works its way through the Colorado legislature.