Colorado Passes Law Creating State-Regulated Health Plan Option

On June 16, 2021, Colorado Governor Jared Polis signed into law House Bill 21-1232, also known as the “Colorado Standardized Health Benefit Plan Act.” The law requires insurance carriers to begin offering standardized individual and small group plans developed by the state alongside their other plans in those markets. The law was amended numerous times after its introduction, but legislators ultimately settled on a private-market solution rather than giving the state the ability to create a public option.

The law gives Colorado’s Division of Insurance (DOI) until January 1, 2022, to design the standardized plans through a stakeholder engagement process designed to improve access to coverage, affordability and racial health equity. Among other requirements, the plans must:

• Offer coverage at bronze, silver and gold levels;
• Include coverage for pediatric and other essential health benefits;
• Provide first-dollar coverage for “high-value” services such as primary care and behavioral health care; and
• Meet minimum standards for network adequacy.

The DOI has scheduled six stakeholder meetings to gather input on the design of the standardized plans. The meetings are open to the public, with the first meeting scheduled for July 29th.

Beginning January 1, 2023, carriers that offer health plans in the individual or small group markets in any counties in Colorado will be required to offer the standardized plans for those markets in the same counties. For 2023, carriers must offer the standardized plans with premiums at least five percent less than the carriers’ rates for non-standardized plans in 2021, as adjusted for medical inflation. In 2024 and 2025, the rate reduction targets increase to 10% and 15%, respectively, compared to 2021 rates. For each year after 2025, any premium increases may not be greater than the rate of medical inflation for the prior year. The premium reduction requirements for the standardized plans are contingent upon the state applying for and receiving a Section 1332 Waiver from the federal government.

The law does not require hospitals or health care providers to automatically accept the standardized plans, but if a carrier is unable to meet the premium targets or network adequacy requirements in a particular county, the DOI can step in to mandate that certain providers accept the plans and to set reimbursement rates. Reimbursement rates established by the state will be based on the amounts Medicare or Medicaid pay for the same services, with increases for certain rural and independent hospitals, hospitals with a higher than average percentage of Medicare/Medicaid patients, and hospitals that are “efficient in managing the underlying cost of care.” Hospitals and providers will be prohibited from balance billing any members enrolled in the standardized plans. The law also gives the DOI the authority to require carriers to offer the plans in specific counties where no other carrier is offering the plans that year.

The law also includes protections designed to prevent carriers from shifting the costs of operating the standardized plans to its other benefit offerings. For example, if a self-funded health plan believes a carrier is shifting costs from the standardized plans to the self-funded plan, the plan administrator can voluntarily present evidence to the DOI, and the DOI may provide a description to the plan administrator of the services that have experienced the greatest cost-shift. The DOI can also deny rate increases for a carrier’s non-standardized plans if it determines that the rates reflect a cost-shift from the standardized plans.

IMA will be closely monitoring any developments in this area and will continue to provide practical updates as soon as possible.

This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.