Insurance commissioner set to address carriers’ inability to meet rate reduction targets for Colorado Option this summer


Boram Kim


On Wednesday, the Colorado Division of Insurance (DOI) outlined the results of health plans’ premium rate reduction filings for the Colorado Option for the 2024 plan year, submitted by carriers on March 1st. 


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The Colorado Option requires carriers to offer the standardized public option plan with premiums that are 10% and 15% lower than their average 2021 premium rate for 2024 and 2025 plans, respectively. 

Yet DOI revealed that of the 13 carriers offering Option plans (seven individual market and six small group market plans), only Denver Health Medical Plan had met all of the state’s rate reduction targets for 2024. 

The broad failure to meet 2024 targets has triggered public hearings—set to take place in June and July—before the insurance commissioner for carriers and affected stakeholders, aimed at addressing the reasons for compliance failure. 

Following the hearing, the commissioner has the authority to set and enforce provider reimbursement rates and require carriers to offer Option plans in specific counties not covered in either the individual or small group markets.

There will be an opportunity for individual carriers to negotiate a settlement prior to each hearing date this summer. 

During the meeting, board member Kevin Stansbury, CEO of Lincoln Community Hospital and Care Center, expressed concerns over the rate reduction calculation and said there needs to be an adjustment for inflation. 

“I worry that we’re sending the wrong message to consumers and we might be creating unrealistic expectations,” Stansbury said. “I say that as a provider, but we’re experiencing unprecedented inflation right now with our costs—costs of labor, cost of supplies, cost of medications—and I don’t want to make it too complex.

But my question is, are we doing a disservice to our consumers by making it seem like, ‘Hey, you’re gonna see your insurance rates in this plan go down by this much,’ when in reality that may not be true?”

The Colorado Association of Health Plans (CAHP) maintains that DOI did not account for inflation and underpriced administrative costs in its methodology for determining the rate reduction targets, which capped profit and contingency rates for health insurance providers at 2%. 

CAHP, along with other critics of the Option, point out that the policy has led to fewer carriers offering individual and small group products, less competition, and higher health premiums across the state. 

Sen. Jim Smallwood (R – Castle Rock) has been one of the most vocal critics of the Option. In an interview with State of Reform on Thursday, he said the Option has not fulfilled its promise to consumers of lower prices, more choices, and improved health outcomes for underserved communities. 

“When you look at the statistics as to who has purchased the Colorado Option in the small group space, for example, where Colorado is a very robust, minority-owned business community, there was virtually zero take-up of the Colorado Option,” Smallwood said. “How would a person of color who owns a business or is the decision-maker of a business look at the Colorado Option plan? The result was obviously [that] they didn’t pick it.

Out of the 400,000 Coloradans insured under small group plans in the state of Colorado, we can probably count on our fingers and toes [the number of] total businesses in the state signed up—it’s virtually zero.”

Smallwood is concerned that with some of the measures moving through the General Assembly, the state is headed toward a single-payer healthcare system.

A proposal to strengthen the state’s ability to hold carriers accountable for failing to meet premium rate reduction targets for the Colorado Option currently awaits the governor’s signature.  

House Bill 1224, which the legislature passed last month, would allow DOI to limit carriers’ ability to claim excessive profit and administrative expenses as part of its rate setting.

The bill proposes utilizing a local index reflecting the Denver metropolitan area instead of a national US city average for determining the consumer price index (CPI), which is used to calculate adjustments for medical inflation. It would also adjust the application of that local index to apply to the last three years rather than the previous 10 years for the national average.  

DOI said these adjustments will more accurately incorporate medical inflation into rate setting. 

DOI also adopted a series of amended regulations for key policy requirements around the Option’s premium rate reduction, standardized plan design, and culturally responsive network adequacy, which will permanently take effect on June 15th. 

The division has received complaints from both carriers and consumers related to the Option. In its filings for 2024, Cigna cited three local hospitals and their inability to accept reduced reimbursement rates as the alleged reason it could not reach its rate reduction target. Consumers have complained the Option is failing to ensure the availability of adequate provider networks and to fulfill its commitment to zero cost-sharing requirements for diabetic supplies, according to DOI.

While glucose monitors are required to be covered at zero out-of-pocket cost, there are related discretionary items that are not covered. The Option requires carriers to send a letter to enrollees outlining the specific items that are covered. DOI has issued a bulletin to carriers reminding them of their obligations and will conduct a review to ensure compliance. 

These issues are expected to be addressed during the hearings this summer.