Colorado Reinsurance Will Lower Rates of Private Health Care Plans

DENVER (CN) – Health care costs for Coloradans buying health insurance through the state’s marketplace are about to drop, thanks to a reinsurance program which received federal approval Wednesday.

“We are thrilled to announce that Colorado has received federal approval for our reinsurance program, which will directly reduce health care premiums for hundreds of thousands of Colorado families,” Gov. Jared Polis said in a statement. “That’s thousands of dollars in savings that Coloradans can put toward paying the mortgage, saving for college or retirement, taking a family vacation, or just living their lives.”

Reinsurance is essentially a form of insurance for insurance companies. Leveraging a waiver available through the Affordable Care Act, the state will divert money that would have funded tax credits into a funding pool to cover the most expensive insurance bills.

Actuarial firm Lewis and Ellis estimated 78% of claims made in Colorado are for costs less than $1,607. Only 4% of claims exceed $30,000, for which the state will pool $271.5 million to cover.

In addition to the Affordable Care Act waiver that will open up $163 million to the state, Colorado is contributing $87 million from hospital fees, insurance fees and the general fund.

The average Coloradan spends $6,804 on health care every year, making it one of the highest per capita rates in the U.S., according to a report compiled by the Colorado Hospital Association with the Colorado Health Institute.

“The price of health insurance includes both the premiums and the copay and deductible costs, so this can’t just be about reducing premiums while insurers continue to raise out-of-pocket costs on Coloradans,” said Katherine Mulready, senior vice president and chief strategy officer for the Colorado Hospital Association in a statement.

In this July 16, 2019 photo provided by the VA Eastern Colorado Health Care System, George Barrett, 85, of Lakewood, Colo., is checked by nurse Renee Whitley as he recuperates from open-heart surgery at the Rocky Mountain Regional VA Medical Center in Aurora, Colo.  (Shawn Fury/VA Eastern Colorado Health Care System via AP)

“Hospitals are doing our part to address health care affordability. It’s time for all stakeholders to come to the table and work toward comprehensive, long-term solutions that achieve access to high-quality, accessible and affordable health care,” Mulready added.

About 8% of Coloradans currently buy their insurance through the state market, roughly 400,000 people who will be impacted by the change. Individuals who are covered by their employers will not be impacted.

The Colorado Health Access Survey estimated 5 million, or 93.5% of people in the state, were insured in 2017; it is currently collecting data to release a 2019 count. Of these people, 49.4% are covered under an employer-sponsored program and 34% are covered by state Medicare or federal Medicaid programs.

The reinsurance program most helps individuals who made too much money to qualify for tax credits under the conventional system, but were still unable to afford their premiums.

“This fixes a big problem for a small amount of people, but it isn’t the big solution,” said Joe Hanel, communications director for the Colorado Health Institute. “There are a lot of people, disproportionately in rural Colorado who will benefit.”

“This doesn’t solve the underlying cost of health care,” Hanel added.

Gov. Polis signed an act to create the State Innovation Waiver Reinsurance Program on May 17, allowing the program to begin in January and run through Sept. 1, 2023 to waive a provision of the Affordable Care Act from 2020 through 2021.

Colorado is one of several states to enact a reinsurance program, with Alaska being the first last year.

State officials hope the drop in costs will contribute to a 2.9% increase in market participation in 2020.

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