Colorado has a new plan to bring a “public option” of sorts to the state level

Colorado’s Democratic leadership isn’t waiting for the rest of the country to sort out where it stands on health care; it’s forging ahead with an idea to build on the Affordable Care Act at the state level.

This week, two state agencies in Colorado unveiled a plan that would establish a “public option” — of sorts — for health care in the state.

The plan creates a “state option,” a health insurance plan designed by the state that would be made available to all Colorado residents who buy their own individual health insurance. It’s not quite a “public option” because the state plan is not actually run by the government, like Medicaid are Medicare are. Instead, it would be administered through private insurance companies. But the state would set the rates the insurance companies pay health care providers through this plan.

Colorado intends to get the program up and running by January 1, 2022, at the end of Gov. Jared Polis’s first term in office. Democrats swept the elections statewide in Colorado last November, claiming not just the governor’s office but majorities in both chambers of the state legislature as well. Polis, notably, campaigned on bringing a regional universal, Medicare-like health care option to Colorado in partnership with neighboring states in the western part of the United States. The idea echoed an increasingly popular movement among progressives, currently dominating debate among Democratic presidential candidates for public-run health care. Colorado overwhelming voted against establishing a state single-payer program in 2016 (though the politics of that were complicated).

This proposal is not Medicare-for-All, nor is it a state or regional version of it. Instead, Colorado is proposing something that looks similar to a health care system that Gov. Jay Inslee signed into law in Washington state earlier this summer, which also contracts private insurance companies to offer a state-designed plan.

As the national debate around health care goes in circles, this “state option” is part of a growing push in more liberal states to build on the Affordable Care Act.

The Colorado Division of Insurance and the Department of Health Care Policy and Financing unveiled the plan this week in a nearly 200-page report, which estimated the “state option” would save Coloradans 9 percent to 18 percent in premium costs compared to other commercial plans.

Here’s how it works:

That latter part of the plan is a crucial policy measure to cut down health care costs in the state, something Polis’s administration has tackled head-on. Colorado has among the highest hospital costs in the country, which the state government says is the direct result of hospitals failing to contain costs. Colorado hospital costs grew 58.7 percent between 2009 and 2017, when they were 14 percent above the national average, according to a January state report.

By setting rates closer to what Medicare pays, the state hopes insurance companies can negotiate lower prices for other commercial plans as well, with the overall goal of preventing premiums from shooting up for consumers. But while we know that rising health care costs directly result in higher premiums, there’s no guarantee Colorado’s price caps would mean people would benefit. Other states that have implemented state-regulated rates, like Maryland, haven’t necessarily seen those savings translate back to consumers.

And needless to say, hospitals aren’t enthusiastic about this idea. The Colorado Hospital Association has already panned the proposal.

“Colorado hospitals fully recognize that there is much work that needs to be done to address healthcare affordability. But embarking on a path that adds further uncertainty by destabilizing Colorado’s insurance market, on top of instituting government price controls, will likely cause consequences on the state’s health care system beyond what is intended,” the Colorado Hospital Association said in a statement.

The report estimates enrollment in the individual market would increase by between 4,600 and 9,200 people in the first year. For now, the proposal limits this state option to the individual market, but says that it could be expanded to small business and even large businesses later on.

If all goes according to schedule, Colorado intends to implement its plan by 2022. And while it’s not what Polis campaigned on (he advocated for a government-run health care system) it is following in the footsteps of several liberal-leaning states looking to innovate.

Interestingly, Colorado lawmakers have floated actual public options, like a pilot program that would let a small community of Coloradans buy into the medical coverage that state employees receive. But it proved too costly for the small sample size.

In New Mexico, lawmakers are considering a Medicaid buy-in program. In the Pacific Northwest, Washington’s governor signed a similar proposal to Colorado’s that contracts with private insurers to sell state-regulated plans on the state’s Obamacare marketplace. That plan, which goes into effect in 2021, would pay health care providers 160 percent of Medicare rates. Gov. Inslee is optimistic that premiums under that quasi-public option would be 5 percent to 10 percent lower than the current private plans on the marketplaces.

But in some states — like California — the push to limit health care costs has been faced with serious pushback. A proposed all-payer system, where California would create a board to set provider rates for all insurance plans using Medicare as a baseline, was shelved after facing serious opposition from the state’s hospital lobby.

That’s a dynamic lawmakers are very familiar with on a national level, where attempts to address the health care system have been muddled in partisan politics and faced serious pushback from private interests.

The architects of Colorado’s plan are well aware they will be met with opposition. But the proposal is still a draft, and officials are hoping with more feedback this plan can be up and running in the next three years.