What You Need to Know
- Colorado House Bill 21-1232 would require insurers in the individual and small-group markets to offer standardized health plans.
- By 2025, premium rates for the standardized plans would have to be 18% lower than the carriers' 2021 rates, adjusted for medical inflation.
- Starting in 2026, rate increases would be capped at the medical inflation rate.
Colorado lawmakers are close to giving final approval to a bill that could give the state’s insurance commissioner the authority to set some reimbursement rates for some doctors and some hospitals.
Colorado HB21-1232, the “Colorado Standardized Health Benefit Plan Act” bill, is what’s left of a bill that was supposed to create a government run health insurance plan.
The current version of HB21-1232 would create a standardized health plan program.
Every health insurer selling individual or small group major medical insurance coverage in a county would have to offer a standardized health plan in that county, alongside its other products.
If an insurer had trouble getting doctors or hospitals to care for the patients in its standardized plan, the insurance commissioner could make doctors or hospitals join the plan’s provider network. The insurance commissioner could require doctors to treat standardized plan patients for a rate as low as 135% of the Medicare rate for the same service. Hospitals could have to accept rates as low as 155% of the Medicare rate.
If the bill is enacted and implemented as is, and survives court challenges, that would mean that the Colorado insurance commissioner could end up with an unusual level of control over some health care prices.
One reason that could matter would be that state and federal policymakers could use the Colorado health care reimbursement rate provision as a model for other efforts to set prices.
The Standardized Program Design
A standardized plan would have to:
- Cover the same “essential health benefits,” or basic package of health benefits, that the Affordable Care Act now requires major medical insurance policies to offer.
- Cover pediatric care.
- Offer bronze, silver and gold coverage tiers, meaning that it would have to offer a choice of three levels of benefits richness, with the cheapest covering about 60% of the actuarial value of the essential health benefits package and the most expensive covering about 80% of the actuarial value of the package.
- Be subject to review by an advisory board made up of 11 governor appointees.
Starting in 2023, an affected insurer would have to offer a standardized plan for premium rates that were 6% lower than the rates the carriers’ plans offered in 2021, adjusted for the effects of medical inflation.
The standardized plans sold in 2024 would have to be 12% cheaper than the 2021 plans, after adjustment for medical inflation, and the standardized plans sold in 2025 would have to be 18% cheaper.
Starting in 2026, standardized plan premium increases would be limited to the medical inflation rate.
Hospitals, Doctors and other Providers
If a carrier had problems creating a “provider network,” or provider list, for its standardized health plan in a particular county, the Colorado Division of Insurance would hold a public hearing on the network adequacy problems.
“Based on evidence presented at the hearing and actuarial analysis, the commissioner may establish provider and hospital reimbursement rates as needed to meet the requirements,” according to a note prepared by Max Nardo, a Colorado Legislature fiscal analyst.
Commercial health plans and other “payers” often base their health care reimbursement rates on a ratio of what Medicare pays for the same types of services.