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$10,000-a-day fines and other things to know about Colorado’s new public health insurance option bill

Hospitals and insurance companies are required to participate in the plan, which lawmakers finally introduced Thursday

The emergency room entrance to Saint Joseph Hospital in Denver, photographed on Oct. 22, 2019. (John Ingold, The Colorado Sun)
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After months of debate, numerous reports and an opposition advertising campaign, Colorado lawmakers on Thursday officially introduced the bill that would create a public health insurance option in the state.

Many of the details remain the same from earlier proposals — the option plans would be available at first only to people who buy coverage on their own; the state would set hospital prices for people covered by the public option; insurance companies that already sell plans in the individual market would be required to also offer the public option.

But the bill also provides some answers to longstanding questions about how this would all work.

Here’s what’s new in the bill, which is officially House Bill 1349.

$10,000-a-day fines

Up until now, lawmakers have never said exactly how they would compel hospitals to accept the public option. The bill lays out a series of increasingly stiff penalties that hospitals could face if they don’t participate.

The authority would reside in the Colorado Department of Public Health and Environment, which licenses hospitals in the state. At first, CDPHE would issue a warning to any hospital not accepting public option coverage. But that could escalate to as much as $10,000-a-day fines for a month, and then up to $40,000-a-day fines after that. If a hospital still won’t participate, CDPHE could potentially “suspend, revoke or impose conditions on the license” of any hospital not participating in the public option.

Hospitals can ask for an exemption

As with previous proposals, the state would set the hospital prices charged to people covered by the public option through a formula. Supporters estimate the formula would slash hospital prices by 40% on average statewide for those folks.

But the bill creates the ability for hospitals to ask for an exemption, if they can demonstrate “a significant adverse effect on its financial sustainability” from the lower payments. (Some hospitals could actually end up getting paid more under the public option.)

RELATED: Colorado’s public health insurance option puts a bull’s-eye on hospital profits. But some rural facilities could make more.

The bill says the state commissioner of insurance should consult with the state Medicaid agency and a newly created advisory board to make exemption decisions. But, beyond that, it’s unclear exactly what kind of financial distress a hospital would have to be in for the state to issue an exemption.

New authority for regulators

In lots of places, the bill leaves it up to state regulators — especially the commissioner of insurance — to fill in the fine-print details of the plan. These regulators, including the commissioner, are people who are appointed by and who serve at the pleasure of the governor.

Among the big things left up to the commissioner is deciding how insurance companies will be compelled to participate. Companies that are already offering plans in the individual market — where people buy health insurance on their own, without help from an employer — will be required to offer public option plans in the same counties where they are selling other plans. But, if there’s a county where only one company is selling plans, the commissioner can order another insurer to step in to sell the public option in that county.

Colorado Insurance Commissioner Michael Conway speaks at a public forum in Frisco on Feb. 21, 2020. (John Ingold, The Colorado Sun)

The bill instructs the commissioner to consider an insurance company’s “structure, the number of covered lives the carrier has in all lines of business in each county, and the carrier’s existing service areas” when making the decision. But there’s not a lot of guidance beyond that.

The bill also gives the insurance commissioner new authority in other areas of the health insurance market. The commissioner would be able to deny any proposed insurance rate “that reflects a cost shift” between the public option and other plans. In other words, if a hospital tries to make up for its lower revenues under the public option by charging insurers more for people covered by other plans, the commissioner will block it.

There is one check put on these new powers: the advisory board. The board will be made up of nine members, all appointed by the governor or legislative leaders and representing various segments of the health care industry or advocacy community. The board has the ability to overturn a decision by the insurance commissioner — but at least seven of its nine members will need to vote to do so.

It all starts in 2022

Under the bill, people would be able to start buying the public option for coverage beginning Jan. 1, 2022 — a gubernatorial election year, by the way.

A year later, on Jan. 1, 2023, the commissioner of insurance has the authority to expand the public option to small employers — as long as the new advisory board approves. That means coverage in what is called the small-group market could begin in 2024.

Meanwhile, beginning in 2024, state officials will be required to report annually to the legislature about the impact the public option has had on the insurance market, hospital finances and the health care workforce.

State Sen. Kerry Donovan, D-Vail, speaks at a news conference about the introduction of a public health insurance option in Colorado at the state Capitol on Thursday, March 5, 2020. (Jesse Paul, The Colorado Sun)

Two sides

The news conference Thursday at the state Capitol where lawmakers unveiled their bill was one of the best-attended of the session.

“This is the issue that I hear at the doors, that we must lower the cost of health care,” bill sponsor Sen. Kerry Donovan, D-Vail, said in announcing the legislation.

After the speeches were over, it became clear those in the room fell largely on two sides. Consumer health-advocacy group, like the Colorado Consumer Health Initiative and Healthier Colorado, are staunchly in favor of the proposal. CCHI is organizing volunteer phone banks to support the plan.

On the other side are hospitals and health insurance companies. Amanda Massey, the executive director of the Colorado Association of Health Plans, said in a statement that she believes the public option “will not be effective in reducing costs, creating competition, or offering choice to Coloradans.”

Heidi Baskfield, the vice president of population health and advocacy at Children’s Hospital Colorado, said the plan doesn’t do enough to address costs in the entire health system.

“We need a comprehensive approach for a long-term fix,” she said.

To the extent there is a middle ground, that’s where the Colorado Medical Society, which represents doctors, landed. The society says it supports the plan’s aim to lower costs for consumers and provide more competition in the insurance market, but it isn’t sure this is the right solution.

“We are committed to being part of this process to ensure that physicians have the ability to practice medicine in the way that provides the best care to their patients,” Dr. David Markenson, the society’s president, said in a statement.

A new name

Lastly, a note on language.

When lawmakers first began talking about this idea last year, they talked about wanting to create a “public option.” But what the state has come up with here, technically, is not that. In wonk-speak, a public option refers to an insurance plan that is run by the government — like the ideas being floated on the presidential campaign trail to allow people to buy into Medicare coverage.

But Colorado lawmakers and state officials, not wanting to put the state budget at risk by creating a government-run insurance company, decided to go with this privatized but heavily regulated approach. We at The Sun have continued to refer to this proposal as a “public option,” mostly for continuity and lack of a better name,

Well, the bill creates a new name for this proposal: the Colorado Affordable Health Care Option. So, going forward, expect us to use variants of that name. Bon voyage, Colorado public option.

The headline and text of this story was changed on March 6 to correct the maximum daily fine amount hospitals could be penalized if they do not accept public option coverage. The bill, as introduced, lists the amount as $10,000 per day for the first 30 days and then $40,000 per day after that. An embargoed version of the bill provided to the media earlier this week by House Democrats listed the daily fine amount as up to $50,000, but bill sponsor Rep. Dylan Roberts, D-Avon, said that was changed at the urging of the hospital industry.

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