The bulk of the health insurance savings touted by the Polis administration is either not new or “only hypothetical” because state officials assumed a behavior that, in fact, contradicts how consumers make decisions, a Denver-based think tank claimed in an analysis Thursday.
In response, the head of the state's insurance agency called the study "misleading."
The Polis administration earlier credited its actions for "driving substantial savings" — to the tune of $326 million. In fact, Coloradans face a 7.4% hike in the small group market, which insures companies of between two and 100 employees, and 10.4% in the individual market, which serves people who must pay for their own health insurance, in 2023.
At the heart of the issue is the Colorado Option, a state-designed health plan that insurers must start offering on Jan. 1, 2023 and which the Polis administration touted as a mechanism to bring down insurance costs.
In a report, the Common Sense Institute, a free enterprise think tank, said the $294 million in savings — out of the $326 million touted by the administration — is already accounted for via Colorado’s reinsurance program, which has been in place since 2020 and which impacts only the individual market, not the small group market.
Another $14.7 million in savings "assumes that consumers will immediately switch to the lowest-cost Colorado Option plans within each metal tier," the analysis said. Given that Colorado Option plans will not be the least expensive in the market, the report said, consumers are more likely to shop for the least-expensive non-Colorado Option plans.
In addition, the Colorado Option will pose a "range of risks to the broader health care market," particularly for premiums consumers pay for their health insurance.
Chris Brown, vice president of policy and research at CSI, said the required premium reductions will grow from 5% in 2023 to 10% in 2024, finally landing at 15% in 2025, resulting in challenges for carriers to operate in Colorado.
The plan imposes cuts on health insurance premiums, as dictated by the legislation adopted in 2021, but CSI said the caps on future premiums is set too low to allow for increased medical costs the healthcare industry will face in the future.
That will force health care providers to choose between cutting services or passing on the costs by raising prices for most insured Coloradans, Brown said. It's likely that traditional employer-sponsored plans will be hit with those higher costs.
“I think every healthcare provider, hospital, doctor, physician, is going to be faced with a different set of variables in making that decision,” Brown told The Denver Gazette. “But similar to Colorado households, hospitals and doctors are also facing inflation which impacts their costs of delivering care.”
“When you see these kind of disruptions, carriers leaving, large price increases, it makes it significantly harder to grow and operate a business,” Brown added.
In a statement, Colorado Insurance Commissioner Michael Conway insisted that Coloradans will see savings and suggested that contrary claims are "misleading."
"The legislature, Gov. Polis and organizations that care about people have worked hard over the last four years to put things in place to save people money on health care. That is shown by the $326 million in savings people can achieve next year that the Colorado Division of Insurance detailed in the Oct. 25 press release," Conway told The Denver Gazette. "The division’s rate review work, the Reinsurance Program and the Colorado Option save people money on health care."
Conway added: "Health insurance companies, at different points, fought all of those programs. So, it should come as no surprise that health insurers and their special interest groups are continuing to put out misleading information about them. We stand ready to work with organizations that want to save people money on health care. We sincerely hope that whoever is funding this misleading work from the Common Sense Institute will make the decision to engage in a more constructive manner moving forward."
The CSI analysis said the risk that providers face will be "especially evident" in the small-group market: its modeling from 2021 projects providers could collect 37% less revenue from small-group plans by 2030.
The group noted that, already, four health insurance carriers have left either the small-group or individual market — or both — in Colorado.
- Bright Health pulled all of its health insurance plans – small group and individual, as well as Medicare – out of Colorado, affecting at least 55,000 consumers in eight mountain counties;
- Humana, which plans to withdraw its self-insured and small group plans from Colorado by 2024, affecting 183,000 subscribers;
- Oscar Health, which announced in May it is leaving the individual market; and
- Peak Health, a co-operative that insures 6,400 people, said it will not operate in 2023.
The departures means hundreds of thousands of Coloradans will now have to look for health coverage elsewhere and potentially lose access to their preferred providers.
The group also said that, in 2023, 91 fewer individual-market plans will be offered than in 2022.
"When stricter price controls come into force in 2024 and 2025, even more plans and carriers may be forced out of Colorado," the CSI study said.
Kelly Caulfield, executive director at CSI, said Coloradans will face these premium hikes amid other inflationary pressures.
“Health insurance rates are rising, we know higher-ed tuition is rising, we know that it’s becoming more and more unaffordable to live in the state of Colorado,” Caulfield said. “So, I think we’re asking in ‘23 that we hope that policy makers will think about how all of these different policies interact a bit more, and it is creating, I think, a more challenging environment for consumers.”
