Colorado: Reinsurance bill passes House minus the rate setting funding provision
h/t to Rachel Schwab for the heads up!
A couple of weeks ago I reported that the Colorado legislature was moving on an ACA reinsurance bill which, on the surface would seem to be similar to other reinsurance programs implemented in over a half-dozen other states to cut down on individual market premiums. The Colorado bill, however, had an unusual funding mechanism:
While similar programs have gone into effect in a number of states, Colorado’s funding mechanism for reinsurance would be an innovative approach. This mechanism utilizes Medicare reference-based pricing to bring down health care costs (what is paid to hospitals and doctors). Medicare-reference-based pricing means that the hospitals, doctors and other healthcare providers would be paid a percentage of what Medicare would pay. For example, the program may pay 150 percent (or 1.5 times) of what Medicare would pay for services, which would be less than what is currently paid to healthcare providers. That savings is then passed on to consumers in the form of lower premiums.
In other words, the doctors and hospitals would simply...be paid less than private insurance carriers would normally pay them, thus leading to premium reductions. This, of course, is otherwise known as "government set price controls"...which will have to play a major role if the U.S. is to ever significantly lower the overall cost of healthcare. Passing and enacting this bill would have been a major foot in the door for that.
As you probably figured, that didn't end up happening after all:
A bill hailed as a landmark way to lower health insurance costs, especially for rural Coloradans, cleared the House Monday on a bipartisan 47-15 vote. But it's different from the version that Gov. Jared Polis touted when it was introduced in February.
House Bill 1168, which now heads to the Senate, would set up a short-term reinsurance program -- think of it as insurance for health insurers -- that rural lawmakers hope will drive down the cost of health insurance premiums.
...But between then and now, word came down from the Center for Medicare and Medicaid Services (CMS), the federal agency that grants states a waiver to enter into reinsurance programs, that the model originally contained in HB 1168 wouldn't fly in Washington. And hospitals weren't happy about being forced to reduce their rates, either.
So lawmakers in the House, including the bill's sponsors, Democratic Rep. Julie McCluskie of Dillon and Republican Rep. Janice Rich of Grand Junction, went back to work, and the solution is one that more closely mirrors what other states have done.
...The agreement negotiated with the hospitals, McCluskie said, is for a special provider fee, possibly based on the number of inpatients and outpatient visits, and on a hospital's net patient revenue.
In other words, instead of paying hospitals less up front, the reinsurance program will still let them be paid exactly what they normally would be...they'd just have to pay a chunk of it back in order to fund the program. Ah, well.
Anyway, I'm still hoping it goes through, since, if the projections prove to be accurate, it would reduce unsubsidized premiums on the individual market by around 23% on average state-wide, with higher reductions in rural areas.