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4 numbers that explain the $165 million funding controversy around Gov. Polis’ reinsurance program

As legislative budget writers raise questions about the program’s cost, supporters defend it as bringing meaningful benefits to Coloradans

The Colorado Capitol, photographed on April 22, 2019. (Jesse Paul The Colorado Sun)
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Colorado lawmakers clashed Wednesday with one another over the true cost of one of Gov. Jared Polis’ signature legislative accomplishments, turning the normally stoic chambers of the legislature’s Joint Budget Committee into a theater of grimacing faces.

Skeptics of the state’s new reinsurance program — which is reducing what thousands of people across Colorado who buy their own health insurance will pay for coverage next year — raised questions over whether it is an efficient way to spend money. One lawmaker called the budget projections for the program a “whiff,” before walking back his rhetoric. Meanwhile, lawmakers who sponsored the reinsurance plan defended the program and its budgeting, and they lobbied legislative budget writers to wait before making any decisions about its continued funding.

The source of this debate is a new analysis by the nonpartisan budget staff that shows the reinsurance program could have as much as a $184.6 million impact on the state’s general fund — roughly 800% more than was initially projected. (The general fund is the discretionary spending from tax dollars decided by state lawmakers.)

Read the Joint Budget Committee staff memo here. 

The JBC memo confirms previous Colorado Sun reporting about the program’s potentially ballooning budgetary impact, and it also raises questions about what lawmakers will have to spend to make sure that next year’s health insurance premium decreases are sustainable in the future. But, as the meeting made clear, there is also significant disagreement over how to interpret the budget figures and how much reinsurance should be blamed for them.

Here are four numbers to help make sense of a controversy that will roil legislative budget talks for months to come:

Gov. Jared Polis speaks to reporters on Jan. 16, 2019, about his budget proposal. (Jesse Paul, The Colorado Sun)

$164.5 million

This is the figure at the heart of the debate over the program’s costs.

When lawmakers approved the reinsurance program earlier this year, its estimated total impact on the state’s general fund over its two-year run was $20.1 million. Now it’s an estimated $184.6 million, according to the JBC memo. That’s a $164.5 million difference.

What changed?

Two things. First, the Polis administration has asked for an additional $60 million to fund the program. (More on that later.) But, more significantly, the state is now expected to exceed constitutionally mandated revenue caps set under the Taxpayer’s Bill of Rights, or TABOR, and refund the surplus to taxpayers. (More on that here.)

In the JBC analysis, the TABOR change supercharges the general fund implications of reinsurance, as some spending gets counted twice — the first time as the actual dollars the state is spending on the program and then a second time as a “TABOR obligation,” the money the state has to pinch elsewhere from the budget to help pay the refunds to taxpayers.

A chart showing the general fund and TABOR impacts of Gov. Jared Polis’ reinsurance program, taken from a Joint Budget Committee staff briefing document on Dec. 18, 2019. (Screenshot)

State Sen. Paul Lundeen, a Monument Republican who does not sit on the JBC but attended the briefing, called the $164.5 million change “a big whiff” — a swing and a miss — though he later said the term might have been too strong.

“The delta on that is remarkable,” he said, using a mathematical term for change.

But supporters say it’s unfair to attribute the TABOR implications specifically to the reinsurance program.

“We don’t normally charge a program for TABOR impact,” said Sen. Bob Rankin, a Carbondale Republican who sits on the JBC and sponsored the reinsurance law.

It’s also uncertain what the figure will look like in a few more months. As the state’s budgetary projections evolve, it’s possible the revenue forecasts for next fiscal year could drop back below the TABOR limits, lowering reinsurance’s budget impact dramatically. And the Polis administration has hinted at a forthcoming bill that would tweak the funding structure, also cutting reinsurance’s TABOR impact.

“We’re throwing darts at a moving target,” said Eric Kurtz, the JBC staffer who did the analysis.

State Sen. Bob Rankin, a Carbondale Republican, speaks at a news conference on Thursday, March 28, 2019. He is on the Joint Budget Committee. (Jesse Paul, The Colorado Sun)

$18.4 million

Out of the $60 million in additional money requested by the governor’s office, this is how much is needed “to eliminate the deficit in state funding” for the reinsurance program’s second year, according to the JBC analysis.

(The reinsurance program essentially uses state and federal dollars to cover insurance companies’ costs for expensive members. The state is pulling its money from fees on hospitals, the elimination of a tax break for big retailers and taxpayer dollars. The state share of the program is now expected to be about $91.5 million per year; the federal contribution still has yet to be announced but is expected to be around $160 million.)

If this $18.4 million doesn’t come through, the state would have less money to put into reinsurance for 2021. That means the program would save people less money in 2021 than it will in 2020 — about 20% less, according to the JBC analysis.

For weeks, the Polis administration has been saying that the reinsurance program doesn’t have a funding shortfall.

“There is no funding shortfall in reinsurance,” Colorado Commissioner of Insurance Michael Conway said earlier this month at a conference hosted by the Colorado Health Institute. “I understand that is a talking point that is being put out there. It’s false. It is not true.”

On Wednesday, a spokesman for Conway said the commissioner was referring to there being no shortfall based on the previously appropriated funding. He confirmed the $18.4 million is needed to achieve the same savings in the program’s second year as in its first.

“For the second year of the program, the legislature structured the reinsurance program to work with whatever funding was available,” spokesman Vincent Plymell wrote in an email. “…In other words, there cannot be a funding shortfall because of the way the legislature set up the program.”

Michael Conway speaks to Colorado Gov. Jared Polis at Red Rocks Community College on Thursday, Dec. 12, 2019, for a stop on his listening tour. (Jesse Paul, The Colorado Sun)

$41.6 million

This is the remaining chunk of the governor’s $60 million budget request. And, for the first time, his office revealed that at least some of this money is intended as a down payment on a not-yet-approved third year of the program.

Extending the reinsurance program for a third year would require passing a bill in the legislature, which Polis spokesman Conor Cahill said would come in the 2021 legislative session.

“The governor has successfully partnered with legislators on both sides of the aisle to help save people money on health care and looks forward to continue doing so,” Cahill said in a statement. “The bipartisan program is working as it was designed to and helping to bring health care savings across our state.”

Colorado state Rep. Julie McCluskie, D-Dillon, introduces Gov. Jared Polis at a town hall meeting in Frisco on Feb. 1, 2019, as state Sen. Bob Rankin, R-Carbondale, looks on. (John Ingold, The Colorado Sun)

223,173

According to the state Division of Insurance, this is the number of people who buy health insurance on their own — the only group eligible to see their health insurance premiums decrease as a result of reinsurance. 

These people saw their underlying premium costs drop by an average of 20% for 2020 — with the biggest decreases coming on the Western Slope and the smallest coming on the Front Range. But, for various complicated reasons, some people saw what they pay actually increase. The state hasn’t been able to say yet how many people fall into which category.

But this gets to the ultimate question lawmakers will debate about reinsurance — Is the benefit worth the cost?

“If what we’re trying to accomplish is lower health care costs for a certain part of the market, for a certain set of patients, are we doing that in the most efficient way?” state Rep. Chris Hansen, D-Denver, asked rhetorically during Wednesday’s meeting.

Sen. Dominick Moreno, a Commerce City Democrat and another JBC member, hinted at frustration that the reinsurance program only helps people in the so-called individual market, a group that only makes up about 7% of the state. The majority of Coloradans get insurance through an employer.

“I don’t just hear from folks in the individual market who are concerned about their cost,” he said.

But supporters of the program encouraged their fellow lawmakers to hold their opinions. Rep. Julie McCluskie, D-Dillon, said the state is still collecting all the data needed to assess the program’s impacts. But she said, for the people that reinsurance has helped, the benefit could mean thousands of dollars a year in savings for their household budgets.

“I want to urge caution from all of us,” she said. “We need to wait and see.”


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