Which Colorado laws are actually lowering health care costs?
If there’s an idea that might reduce health care costs, there’s a good chance Colorado’s trying it out.
The state’s Office of Saving People Money on Health Care laid out a plan in 2020 that included passing a partial public option; extending the reinsurance program; launching a statewide purchasing alliance; importing prescription drugs; launching a drug affordability board; and increasing transparency in hospital and prescription drug prices.
Other than the importation plan, which has to be approved by the U.S. Food and Drug Administration, all of those agenda items have at least started to be put into practice. Most are in the early stages, however, making it difficult to assess if they’ll succeed in bringing costs down.
Colorado is ultimately pursuing two paths to lowering health care costs, said Bob Smith, executive director of the Colorado Business Group on Health. The Colorado option insurance plan is an example of setting rates, while the purchasing alliance is an attempt to negotiate better deals through the market, he said.
“I think the state is trying to see which of these two approaches will get better results,” he said.
Gov. Jared Polis disputed the idea that the state’s testing two different philosophies and may ultimately pick a winner. It’s going to take many strategies to address health care costs, he said.
“America does health care poorly,” he said. “We want good ideas from the left, the right, the middle.”
Unlike a full public option for health coverage, Colorado Option plans are run by insurance companies. The difference from other plans is that they’re standardized, meaning that all option plans have similar out-of-pocket costs; they offer more services without co-pays or other direct costs; and they’re required to reduce premiums by 15% over the next three years, adjusted for inflation.
Not all Colorado Option plans met the 5% reduction for 2023, though the majority of people who get their insurance through the marketplace have access to at least one plan that did, according to the Colorado Division of Insurance. In all counties, there is a silver-level Colorado Option plan that’s cheaper than the average silver plan.
About 35,000 people enrolled in Colorado Option plans this year, including about 10,000 who weren’t eligible for tax credits because of their immigration status, but received state subsidies.
The 25,000 who are citizens and could choose any plan represent about 13% of people buying on the individual market in Colorado, which is significantly more than Washington’s public option captured in its first year, Colorado Insurance Commissioner Michael Conway said.
“A new product taking over 13% of the market is going to be eye-popping,” he said.
Adam Fox, deputy director of the Colorado Consumer Health Initiative, said that while the premiums were a disappointment, they may start to drop next year, when the state can hold hearings investigating prices.
Also, it can be worthwhile to offer patients a health insurance option with fewer out-of-pocket costs and more incentives for primary care, he said. Customers don’t have to pay for visits to their primary care or mental health provider, or for diabetes testing supplies.
“While they are not the lowest-cost plans, they are the highest-value plans,” he said.
Reinsurance is one of the bigger success stories in efforts to bring costs down, even if people don’t often think about it, Fox said. And since the state has long-term funding for it, the benefits will continue for at least the next few years, he said.
“Colorado, or at least some parts of our state, were some of the most expensive (insurance) markets in the country,” he said. “That’s no longer the case because of reinsurance.”
It’s essentially a backstop, limiting how much insurance companies selling on the marketplace have to pay out if a customer’s care exceeds $30,000. The amount of assistance they get depends on what part of the state the customer lives in, with more money available in more-expensive markets where people have fewer choices for insurance.
Insurance companies are required to spend 80% of the premiums they collect on customers’ care, so if the amount they’re on the hook for goes down, so do premiums. That decrease has been largely overridden by other increased costs, meaning reinsurance has been more of a method to limit rate hikes than to bring rates down.
Connect for Health Colorado estimated premiums for 2023 would have been about 20% higher without reinsurance.
The state employee health plan and other partners in the Colorado Purchasing Alliance are trying to steer employees toward hospitals that get better results at lower prices. It’s too early to tell if the incentives the state is offering to employees who pick higher-value providers using its decision tool will result in a notable savings, though.
Ultimately, health care costs aren’t a problem the state can solve alone, since about half of Coloradans work for employers who aren’t based here, Smith said. Right now, the purchasing alliance is working with national employers to set quality standards — say, the percentage of patients with diabetes whose blood sugar should be under control — which local doctors can meet however they deem best, he said.
“How you improve, where there’s room to improve, is very local,” he said.
If the FDA approves the importation of drugs, participating residents could save up to 65% on certain common medications, for a total savings of $53 million to $88 million, the Colorado Department of Health Care Policy and Financing estimated. Colorado law would allow the state to import drugs from other countries, but federal law only allows that arrangement with Canada at this point.
The FDA still hasn’t approved similar proposals from Florida, New Mexico and New Hampshire, which submitted them more than a year ago. The Canadian government has opposed importation plans because of concerns that feeding the much-larger American market could lead to shortages.
FDA Commissioner Dr. Robert Califf said in an interview that he couldn’t comment on specific states’ proposals, but that the quality of the plan a state puts forth will be an important factor in determining how quickly it can move forward.
Colorado has been able to learn from other states’ mistakes and should have a smoother process, said Kim Bimestefer, executive director of the state Department of Health Care Policy and Financing. The state already has identified partners to import, test and distribute the drugs from Canada, she said.
“Florida got a little ahead of their skis,” she said. “That’s OK. We learned from Florida.”
Drug affordability board
The prescription drug affordability board is still finalizing its rules, and is expected to start reviewing drugs in March.
The board will be limited to setting maximum prices for 12 drugs a year, for three years. Members of the public can ask the board to review certain drugs, and a review is triggered if a drug’s price increases 10% within one year; a brand-name drug costs more than $30,000 per year; or a generic drug costs $100 or more per month.
How effective the board is will depend on how aggressively it sets its maximum prices; how many people take the drugs it is regulating; and whether there are any unintended consequences, such as drugmakers refusing to sell in Colorado.
In June, Polis signed a bill prohibiting hospitals that haven’t posted their prices from suing patients or sending them to collections over unpaid medical bills. The state doesn’t enforce the law, however; patients who believe a hospital pursued aggressive tactics improperly have to sue to get their debt forgiven and collect damages.
No one tracks these cases, so it’s not clear if anyone has sued, and if so, if they were successful. It’s possible that the chance of a lawsuit could discourage hospitals from sending patients to collections, or encourage more transparency in posting prices.
The Colorado Hospital Association reports the vast majority of facilities are complying with federal laws on posting prices, while patient advocacy groups say they frequently find holes in the price lists on Colorado hospitals’ websites.
The Centers for Medicare and Medicaid Services ultimately decide who’s in compliance, but they only fined two hospitals nationwide for not posting prices in 2022.
Transparency can be helpful for people who are scheduling care, but it doesn’t do much for those who have a medical emergency, Fox said.
Discounted hospital care law
Colorado hospitals are now required to screen uninsured patients to see if they qualify for discounted care, based on their incomes. People can opt out of the screening.
No one is tracking how many people received large bills before and after the law took effect, but Fox said that fewer people have been calling the Colorado Consumer Health Initiative asking for help in the months since.
“We’re already seeing some benefits from our consumer assistance program,” he said.
Insulin price cap
Colorado caps the monthly out-of-pocket cost for insulin at $100 in health insurance plans regulated by the Division of Insurance. People who are uninsured or have a plan that isn’t state-regulated can apply for a program that lets them purchase insulin for $50 a month.
No one tracks how many people have taken advantage of the cap or how much they’ve saved. But people with diabetes have reported they have an easier time affording their insulin, Lt. Gov. Dianne Primavera said. Primavera heads the Office of Saving People Money on Health Care.
“Behind every number, there’s a person,” she said.
More to come?
The Department of Health Care Policy and Financing expects to publish a review of hospitals’ compliance with posting prices in February and to roll out tools for comparison shopping in June. That’s separate from an existing tool for providers to compare the cost of similar drugs, which the department estimated 43% of prescribers who see Medicaid patients are using.
Some laws targeting health costs that passed last year won’t take effect until 2024. One of those is House Bill 1370, which will require insurance companies to pass drug rebates they receive onto customers. The Division of Insurance estimated that rebates account for about 21 cents of every dollar spent on brand-name drugs, though the amount of savings will vary.
A bill currently in the legislature would build on Colorado’s law capping out-of-pocket costs for insulin, placing a similar cap on EpiPens, which treat life-threatening allergic reactions. Polis said he doesn’t anticipate the state will continue addressing the price of single drugs indefinitely, but EpiPens and insulin are special cases.
“These are cheap to manufacture. They’ve been around for decades,” he said. “That’s different from a brand-new drug that cost a billion to develop.”
In his State of the State address, Polis called for legislative changes to ensure nonprofit hospitals aren’t charging prices he considers excessive. The Internal Revenue Service requires tax-exempt hospitals to show they provide “community benefit,” but that’s broadly defined and can include things like employee training, as well as charitable care.
“In exchange for (not paying taxes), they should carry the responsibility of not overcharging patients,” Polis said in an interview, adding that insurance companies could be an ally if the state can put the “fire in their belly.”
Some efforts, like the reinsurance program, have stabilized the cost of health insurance in the state, Fox said. It remains to be seen if the newer laws can actually reduce costs for individuals and for the state as a whole, he said.
“Each of these measures that we’ve put forward in Colorado is meant to address different aspects of the health care system,” he said. “Hopefully, they’ll complement each other.”
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