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The website for Connect for Health Colorado, the state's health insurance exchange, shown in October 2018. (Eric Lubbers, The Colorado Sun)

A big change to how Colorado proposes to fund a massive new program to bring down health insurance prices will cost the state’s hospitals as much as $150 million per year — but that’s nearly $100 million less than they would have been on the hook for under the previous plan.

Lawmakers in the Colorado House on Friday passed an amendment to rewrite how the state plans to pay for a “reinsurance” program for the state’s individual health insurance market — where people who don’t get coverage through their employers buy it on their own.

The program seeks to gather up a bunch of money that can be used to help insurance companies pay for their highest-cost claims. Insurers’ savings can then be passed on in the form of lower premiums for everybody — as much as 35% lower in some parts of the state.

Under the old plan, bill sponsors had proposed a novel way to pay for the program — through limiting what hospitals could charge in certain situations, making Colorado’s program potentially the first in the country to pay for reinsurance through mandated hospital price cuts rather than fees on insurance carriers.

State Rep. Julie McCluskie, a Dillon Democrat. (Handout)

But the bill’s sponsor, Dillon Democratic Rep. Julie McCluskie, said that approach ran into trouble because the Trump administration signaled it would be unlikely to sign off on it. Federal dollars are also needed to make the program work, so the federal government’s approval is key.

That sent McCluskie back to the negotiating table, and, on Friday, she walked onto the House floor with an agreement for hospitals to pay fees of up to $150 million a year — and no more than $500 million over five years — to fund the program.

McCluskie said she had genuinely hoped to use the program to drive down hospital prices. But she said it was more important to move forward with a scheme more likely to be approved.

“It was hard for me to give up the cost-savings approach,” she said. “I really thought we had a chance to make a dramatic change to a broken, dysfunctional health care system. … (But) we are in a health care crisis on the Western Slope, and we’ve got to take action as soon as possible to reduce health care premiums for working people.”

Hospitals, too, had mixed feelings about the deal. Officially, they only moved their stance on the bill, House Bill 1168, from “opposed” to “neutral.” But Joshua Ewing, the Colorado Hospital Association’s associate vice president of legislative affairs, said the change will bring greater predictability to hospital budgets.

Throughout the debate, hospitals have been trying to get insurers to also kick in money to fund the program. That won’t happen under the new proposal unless the federal government suspends an obscure tax on insurers.

But Ewing said hospitals have a good reason to want to see insurance prices drop. As premiums rise, people are more likely to go without insurance — often sticking hospitals with the bill for their care. But expensive insurance plans can cause a separate problem, too, because people with insurance are increasingly struggling to afford the out-of-pocket portions of their plans.

Denver Health medical center, photographed on Thursday, April 4, 2019. (Jesse Paul, The Colorado Sun)

Ewing said hospitals now can be in the position of trying to collect thousands of dollars owed by patients from their insurance deductibles — at a time when many families can’t afford unexpected bills of a few hundred dollars.

“It’s actually having adverse impacts on our health care system,” Ewing said. “… We’re not going to bankrupt somebody because they can’t afford their copay.”

So, Ewing said, hospitals decided to try to help with a solution, even if it meant likely bearing much of the cost.

“At the end of the day, hospitals are proud to lead by example,” he said.

The amended proposal passed the House on an initial voice vote Friday morning. (It still needs a recorded vote in the House before it can move to the Senate.)

But the bill, which has bipartisan support, drew criticism from some Republican lawmakers who pointed out that, even with this change, Colorado will still be the first state to try to fund a reinsurance program through payments from hospitals and not insurance companies.

MORE: Colorado lawmakers nixed an experiment to allow people to buy into state employees’ health coverage. Here’s why

“I struggle with the idea that we can remove that sum of money from the system without seeing a cut in access to providers or quality of care,” said Rep. Colin Larson, R-Littleton.

A provision in the bill prohibits hospitals from passing the fees on to patients. But it’s yet to be decided how the total cost will be divided among the state’s hospitals or which financially vulnerable hospitals will be exempted from having to pay at all.

Ewing said it’s likely the state’s largest hospital systems will carry the most weight. And McCluskie said she believes it’s important to make hospitals, not insurers, pay the tab.

“I really do believe,” she said, “that the money in the system is with our providers and hospitals.”

John Ingold is a co-founder of The Colorado Sun and a reporter currently specializing in health care coverage. Born and raised in Colorado Springs, John spent 18 years working at The Denver Post. Prior to that, he held internships at...