DENVER — Gov. Jared Polis announced Wednesday that the federal government approved a Colorado reinsurance plan designed to lower premiums for individuals buying insurance on the state health care exchange.
“We are thrilled to announce that Colorado has received federal approval for our reinsurance program, which will directly reduce health care premiums for hundreds of thousands of Colorado families. Bringing down the outrageous cost of health care in our state has been a top priority for my administration from the beginning, and this is a significant milestone on our way toward achieving that goal."
Reinsurance is essentially insurance for insurance companies -- essentially, instead of insurance companies and consumers paying a medical provider for coverage of a high claim, a state fund that includes federal dollars would be created to help insurance companies pay for those high claims, on the belief that insurance companies would lower the cost of premiums for the consumer.
Polis already has released projections showing that next year's premiums for 400,000 Coloradans - about 8% of those buying insurance on the exchange - will drop by more than 18% with a reinsurance plan in place. The state estimated families on the Western Sloper could see as much as a 29% decrease in costs.
Under the program, the state covers the most expensive medical claims, allowing private insurers to lower rates for individuals participating in the individual Connect for Health Colorado market.
Polis said there are indirect benefits for people who get insurance from their employers, as well.
"One of the biggest costs in healthcare is the cost of the uninsured. Uninsured people go into the hospital, the hospital basically spreads those costs about other people. You're paying more because you're paying for the costs of the uninsured," he told 9NEWS. "Right now, we're about 6 to 7 percent of uninsured, if that comes down a percent or so, that'll save money no matter how you buy your insurance."
The program starts for 2020 coverage plans.
Federal approval is needed because roughly two-thirds of the reinsurance program will be paid for with federal funds currently used for tax subsidies for patients purchasing insurance under the Affordable Care Act. In 2020, Colorado's program will use $163 million in federal funds and $87 million in state funds.
But the program only remains intact as long as the Affordable Care Act stays in place. The health care plan enacted under the Obama administration faces legal challenges. If Obamacare is ruled unconstitutional, Colorado wouldn't have the federal funding it needs to maintain reinsurance.
Katherine Mulready, senior vice president and chief strategy officer for the Colorado Hospital Association, said in response to Wednesday's announcement that the CHA recognizes healthcare costs have become too expensive for many consumers:
“Colorado hospitals recognize that the cost of health care has become unsustainable for many Coloradans, and we hope that this two-year reinsurance program – largely funded by hospitals – is effective in providing needed relief for patients from high insurance costs. The price of health insurance includes both the premiums and the copay and deductible costs, so this can’t just be about reducing premiums while insurers continue to raise out-of-pocket costs on Coloradans. We trust that the Polis Administration and the Insurance Commissioner will make sure insurers follow the law and that savings from reinsurance are fully passed on to consumers.
Hospitals are doing our part to address health care affordability. It’s time for all stakeholders to come to the table and work toward comprehensive, long-term solutions that achieve access to high-quality, accessible and affordable health care.”
Alaska, Maine, Maryland, Minnesota, New Jersey, Oregon and Wisconsin have federally-approved reinsurance programs, according to the Kaiser Family Foundation.
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