Colorado’s top insurance regulator on Thursday said he will soon propose a rule that allows him to dig deeper into hospitals’ deals with health insurance companies, the latest in the Polis administration’s push for greater say over hospital prices.
Michael Conway, the state’s commissioner of insurance, already reviews and approves the rates that insurance companies charge for plans in a big chunk of the market.
The new rule will give him the ability, as part of that rate-review process, to determine whether the underlying prices that insurance companies negotiate with hospitals are affordable. It will also allow him to look at whether insurance companies are passing onto consumers any price breaks that they negotiate with hospitals — or whether they are pocketing the savings for themselves.
Under the rule, if Conway determines that the prices in an insurance company’s contract with a hospital are too expensive, he could block the insurance plan from being sold. That means the state commissioner of insurance, who in past years has been a pretty low-profile figure, could soon have major influence over what hospitals charge a huge slice of Coloradans.
“The rate-review process, we can do a lot with that,” Conway said Thursday at the Colorado Health Institute’s annual conference, where he announced his plan. “But the affordability standard is a whole new game.”
The authority for Conway to do all this comes from an overlooked bill from this past legislative session. House Bill 1233 instructed Conway to create a standard for what it means for a health insurance plan to be affordable. And it specifically told him to look at the underlying costs of health care — like the prices that hospitals charge — when doing so.
It is not yet clear exactly how Conway will determine whether a hospital’s prices are affordable. But he said part of the rule will be requiring insurance companies to list their negotiated prices with hospitals as a percentage of what Medicare would pay for the same service. He could then use Medicare prices as a reference for whether a hospital is charging too much.
As a hypothetical example, he said if a hospital is charging privately insured patients more than twice what Medicare would pay for the same service, that hospital’s rates — and the insurance plan they are a part of — could come in for closer review. He said he intends for part of those reviews to include public meetings, in order to create more transparency around hospital prices.
“We’re trying to give the market more tools in order to more directly impact what they’re being charged for their health care and their health insurance premiums,” Conway said in an interview.
This is now the second plan the administration of Gov. Jared Polis is working on that would give state officials the authority to restrict what hospitals can charge. Conway and Kim Bimestefer, the head of the state’s Department of Health Care Policy and Financing, are also working on a plan for a public health insurance option. Part of that plan involves creating a formula that limits what each hospital can charge people covered by the public option. (Conway said that formula could also be used for determining whether a hospital’s prices are affordable under his forthcoming rule.)
But there’s one important difference between the two plans.
The public option will at first be available only to people who buy health coverage on their own — about 7% of Coloradans, or a few hundred thousand people. But Conway’s affordability rule will apply to all health plans regulated by the state Division of Insurance — plans that cover more than a million people. The only private insurance plans that will fall outside the rule are those run by companies that choose to self-fund their insurance coverage.
Conway’s announcement of the forthcoming rule appeared to catch some of his fellow panelists off guard at the Colorado Health Institute conference Thursday.
Tom Donohoe, a vice president with the SCL Health hospital system, said he wanted to collect his thoughts on the proposal before responding. But he said he hopes the Polis administration will work more collaboratively with hospitals on reducing health costs instead of creating mandates.
“Some of the proposals here seem a little one-sided to us,” he said. “It doesn’t feel much like a partnership.”
That was echoed by Amanda Massey, the executive director of the Colorado Association of Health Plans, an industry group for insurers. She took issue with Conway’s description of the public option plan as a “public-private partnership.”
“Typically, a partnership includes a choice,” she said. “And this we’re mandated to participate in. So it’s hard to call it a partnership.”
Conway, though, responded that he hopes hospitals and insurance companies will choose voluntarily to work with the state on lowering health costs as part of a shared goal of providing better health care.
“At the end of the day,” he said, “what we’re all trying to do is take care of each other.”