Colorado’s reinsurance program — which would lower health insurance premiums for some by using state and federal dollars to help insurance companies pay their most expensive claims — is starting to take shape, but it still faces a significant hurdle: winning approval from the federal government.
State regulators last week submitted an application for the feds’ OK. The federal government has several months to review the application and make a decision, but state Insurance Commissioner Michael Conway is hoping for a faster timeline with final word coming by the end of summer. He’s so confident of the fast turnaround that he has asked insurance companies to include estimated savings from the program in one set of proposed 2020 rates that they will submit to the state for review next month.
The reinsurance program would benefit those in the individual market — i.e. roughly 8% of people in Colorado who buy health insurance on their own instead of getting it through their employer. And Conway is finalizing details for precisely how the program will work.
But, based on the state’s application and a set of emergency regulations Conway has proposed, we have a pretty good idea already of what it will look like. Here are five numbers to tell the tale.
— The estimated amount the federal government would save in tax credits over a 10-year period if it approves the program, according to the state’s application.
Reinsurance funding is sort of a chain reaction. First the state gets together a pool of money to give to insurance companies to cover really expensive claims. That allows insurance companies to lower their monthly premiums for everybody, at which point the second reaction kicks in. Because premiums are lower, the federal government doesn’t have to spend as much on tax credits to help people pay for insurance. Colorado’s application asks the federal government to put some of those projected savings back into the state’s program — about $163 million in 2020, according to an actuarial analysis included in Colorado’s application.
— The portion the state has to fund for the reinsurance program in 2020.
The actuarial analysis estimates the program will cost about $250 million in its first year, with the state’s share being around $87 million and money from the feds covering the rest. Colorado plans to cobble that money together from increased revenue from existing taxes on insurance companies; a change in how much businesses can hold onto for paying their sales taxes on time; and a roughly $40 million-a-year fee assessed on hospitals.
That last source has given at least one hospital heartburn. In commenting on the program’s draft regulations, an official from Montrose Memorial Hospital said the hospital is in too perilous of a financial situation to help insurance companies out.
“We are not the health care system that created the exorbitant costs that caused insurers to raise premiums to beneficiaries,” a hospital senior director wrote. “If insurances need a funding mechanism … it should not be on the backs of rural Colorado hospitals.”
Colorado’s share for the program could climb above $100 million in 2020 if more claims than expected need to be covered, according to the analysis included in the application. But Conway said he is confident the firm that did the analysis — Dallas-based Lewis & Ellis — ran the numbers correctly, using guidance from the federal government, and the state won’t be stuck with an unexpectedly high bill.
“The actuarial science is the actuarial science,” he said.
— The lower limit at which point the state starts helping insurance companies pay for claims.
The reinsurance program won’t chip in to help insurance companies cover every claim. Instead, for the program to start paying out, a person’s claims must climb above a certain threshold — called the “attachment point.” Colorado’s draft regulations set the attachment point at $30,000, meaning the state will help insurance companies pay for the care of someone whose medical bills top $30,000 in a year.
As far as health care charges go, that’s not a lot, but it’s also not clear how many people’s claims will be eligible for reinsurance, since the majority of people cost insurance companies very little in a given year. In a previous analysis, actuaries said about 15,000 people’s claims would have qualified for reinsurance in 2017 with an attachment point set at $20,000.
— The claims cap at which point the state stops helping insurance companies with claims.
Just as there is a floor in the reinsurance program, there is a ceiling. And the draft regulations set that ceiling at $400,000 — meaning the state will no longer help insurance companies pay claims that total above $400,000.
— The average amount the reinsurance program is projected to reduce premiums statewide.
The analysis included in Colorado’s application predicts that the state will be able to reduce premiums on the individual market by an average of 16 percent statewide — and almost double that in the mountains. (Because of the high cost of health insurance in the mountains and on the Western Slope, the program is structured so that the state chips in the most to help cover claims in those communities.)
These price drops are expected to boost the number of people with insurance in Colorado — by more than 6,000 people, according to the analysis in the application. And Conway said, of all the numbers about the program, this one is what he’s heard about the most from the public.
“People are pretty excited about the premium relief,” he said.
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