Division of Insurance says original saving targets in Reinsurance bill can be achieved
Even under new funding model, substantial savings in HB19-1168 can happen.
DENVER (April 29, 2019) – The Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA), announced that the cost savings targets that were originally part of House Bill 19-1168 (HB19-1168), the State Innovation Waiver Reinsurance Program, can still be achieved under the new funding structure that became part of the legislation last week.
At a Thursday meeting of the Senate Health and Human Services Committee, the Senators debated many things about HB19-1168 and amended the bill to change elements of how it is funded, but one thing that seemed certain was that the original numbers for cost reductions would have to be watered down.
However, after reviewing the most up-to-date data from Connect for Health Colorado on the 2019 enrollment, the DOI says the original targets can be met. This is because the percentage of people receiving tax credits to help pay for their individual insurance and the size of the tax credits both increased for 2019. These were both due to the impact of “silver loading” for the 2019 individual insurance premiums. “Silver loading” required the insurance companies to place the extra costs (or load) for the cost-sharing reductions (CSRs) onto silver-level plans, as the funding for CSRs was eliminated by the Federal government in 2017.
“People across the State in the individual market are struggling. We wanted to see if we could still meet the premium reduction goals in the bill and that we’ve been talking about since January,” said Insurance Commissioner Michael Conway. “I am extremely happy that we will be able to accomplish what the sponsors were trying to achieve with this bill with the new funding. For a family of four, with two adults at age 45, that purchases insurance in the individual market and lives in Pueblo, that could mean they will save approximately $4,000 to $4,500 next year. That same family of four could save over $7,500 to $8,000 if they live in the mountains or along the western slope. This bill will make a real difference in people’s lives.”
HB19-1168 will establish a reinsurance program starting in 2020 for the individual health insurance market - the seven to eight percent of people in the state who do not get their health insurance through their employer or through a government program. Reinsurance works by paying a portion of high-cost claims - such as those incurred after major accidents or due to serious health conditions. As insurance companies don’t have to pay that portion of the high-dollar claims, they can lower the premiums for individual health insurance plans.
Although seven other states have successfully implemented reinsurance programs in recent years, HB19-1168 added a unique proposition to the model, looking to create three tiers of cost savings for different regions of the state. The Denver, Boulder and Colorado Springs areas are targeted for 10 - 15 percent reductions in premiums (tier 1); the Fort Collins, Greeley, Pueblo, Eastern Plains and central southern areas of the state for premium reductions of 15 -20 percent (tier 2); and the mountain, Western Slope and Grand Junction areas for 25 - 30 percent reductions in premiums (tier 3). The tier 3 areas were targeted for the highest reductions as they typically have the highest health care costs in Colorado and thus the highest insurance premiums.
A portion of the funding for the reinsurance program will come from what is known as pass-through funding from the federal government. Under the Affordable Care Act (ACA), for people with household incomes under 400 percent (4 times) of the Federal Poverty Level, tax credits from the federal government are available to help make health insurance in the individual market more affordable. These tax credits are tied to health insurance premiums, so that when premiums go up, tax credits go up, and when premiums go down, the tax credits also go down.
As the reinsurance program brings health insurance premiums down, the amount of money the federal government has to spend on tax credits will also go down. But rather than letting it pocket the money, Colorado will ask the federal government to pass that money through to the state to fund the reinsurance program and maintain the lower premiums and stability it will bring to the individual health insurance market.
For the remainder of the funding, different iterations of the bill have offered different approaches. The initial approach was to use Medicare reference-based pricing to bring down health care costs (what is paid to hospitals and doctors). That approach was changed in the bill when an agreement was reached with the hospitals for them to provide $500 million worth of funding over five years. However, it appeared that that amount of funding from hospitals could violate federal law and might lead to lost revenue from the federal government.
At Thursday’s committee hearing, the bill was amended to change that funding structure. The funding in the current bill comes from a variety of sources including a reduced amount from the hospitals.
“The flexibility in this bill gives the Division of Insurance the space to work and achieve the savings that have been a feature of this legislation since the beginning,” added Commissioner Conway. “Passage of this bill, and its unique structure to bring savings to people purchasing health insurance in the individual market, is the most meaningful thing the legislature can do this session to provide almost immediate relief to Coloradans.”
The Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA) regulates the insurance industry and assists consumers and other stakeholders with insurance issues. Visit dora.colorado.gov/insurance for more information or call 303-894-7499 / toll free 800-930-3745.
DORA is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado. Consumer protection is our mission. Visit dora.colorado.gov for more information or call 303-894-7855 / toll free 1-800-886-7675.