According to a new report, medical inflation could force Colorado health care providers to cut services and pass on rising costs to Colorado Option to insured consumers.
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Data released by the common sense institutea conservative think tank in Colorado, showed medical inflation hit 7.62% in the Denver metro area, nearly 5 points higher than the allowed rate of growth estimated by the Division of Insurance.
Rising medical costs may threaten the viability of the Colorado option, which, starting next year, requires health insurance providers to offer the gold, silver and bronze levels of the standardized plan at significantly lower premiums than they charged for their average plans in 2021.
Under last year House Bill 1232, the stakeholder engagement process was launched last July to expand the benefits of the Colorado Option, a standardized and affordable public health insurance plan that all insurers will be required to offer. The results of this process informed the Division of Insurance (DOI) 1332 Waiver Request, which was submitted to CMS for approval in November.
HB 1232 requires the standardized health plan to address racial health inequities and reduce racial health disparities. Improving perinatal health care coverage and providing first-dollar pre-deductible coverage for certain high-value services, such as primary and behavioral health care, are also part of the strategies focused on health equity defined in law.
At a time when insurers are required to meet these premium reduction targets, medical inflation, a measure of the costs of providing and receiving services in the healthcare industry, is placing additional financial pressures on physicians. , hospitals and health insurance companies.
The Colorado Hospital Association (CHA) and the Colorado Association of Health Plans (CAHP) highlighted these concerns in a joint report letter to the Division of Insurance and explained that they believed the impact of inflation on the Colorado option would negatively affect hospitals.
“The [CSI] The report highlights another major challenge we see for hospitals and healthcare systems facing the implementation of the Colorado Option – the role of inflation and spending growth,” CHA said in a statement released to State of Reform.
“The American Hospital Association also comes published a report on this point as well, showing that over the last two years, hospitals have had to deal with significant increases in the main categories of expenditure such as labor (an increase of almost 20%), medicines (increase of nearly 30%) and medical supplies (increase of 20%). “The Colorado Option relies on using a 10-year historical average of medical cost trends, but Coloradans and our hospitals are experiencing significantly higher cost trends. This program design flaw may result in failure of the program to achieve its goals and could place a significant additional burden on Colorado hospitals, many of which are already operating with unsustainable operating margins.
Democrats in the state legislature have pointed to the profitability of hospitals in drafting legislation to cut costs and lower health insurance premiums. The Department of Health Care Policy and Financing (HCPF) has published a report in 2021, claiming Colorado hospitals were the most profitable in the nation, but CHA argued that since the data was from 2018, it no longer reflected the current situation.
Department of Regulatory Agencies (DORA) officials argue that Colorado’s Standardized Option Plan is designed to incentivize high-value outcomes-based care, remove barriers to care for communities of color, and require that provider networks are culturally sensitive and representative of the community it serves. .
DORA told State of Reform that, in accordance with HB 1232’s requirement for the standardized plan to adjust for medical inflation, it plans to adjust premium targets based on its medical inflation calculations, which differ from the data in the CSI report.
“The law requires the DOI to adjust the premium targets for the Colorado Option for national medical inflation, which the law defines as the ten-year average of the medical care component of the consumer price index (CPI -U),” DORA said in an official statement. declaration to the State of the reform.
“Earlier this year, the DOI issued a bulletin to ensure that our national medical inflation calculations were transparent. At the time of publication of the bulletin, the most recent data available covered a period from March 2012 to February 2022. The ten-year average of the medical care component of the CPI-U during this period was 2.7 %, lower than the 7.2% highlighted in the Common Sense Institute report. However, if this data in the future shows that inflation is 7.2%, we will use 7.2%”.
The DOI is currently in the process of reviewing standard rate plan proposals submitted by carriers and will publish standard rate plan prices in September or October. Standardized Colorado option plans are expected to be available for purchase in November of this year.