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Reinsurance is a proven approach to helping cut health care costs
(Feb. 1) – Rep. Julie McCluskie, D-Dillon, introduced a bipartisan bill today to lower health care costs for Coloradans across the state. Coloradans on the individual market are struggling to keep up with the out-of-control costs of health care, particularly in rural areas of the state. By establishing a reinsurance program Colorado can stabilize the individual marketplace, increase health insurance participation and share the risks more broadly.
“I heard in my own community–and in mountain and rural communities across the Western Slope–that access to affordable health care is the single greatest challenge for hardworking families,” said Rep. McCluskie. “The time for action is now, and we must continue working across the aisle to help lower the high cost of health care in our state.”
Rising health care costs are driven in part by the underlying cost of care but are exacerbated by an insurance market that assigns the highest risks and highest costs to the individual market. This is particularly the case on the Western Slope and in rural Colorado, causing families and individuals to forgo health insurance coverage and putting them at major risk of medical debt if emergencies arise.
Rep. McCluskie introduced the bipartisan bill in the House with Rep. Janice Rich, R-Grand Junction. Senator Kerry Donovan, D-Vail and Senator Bob Rankin, R-Carbondale are the Senate sponsors.
This bipartisan HB19-1168 aims to reduce insurance premiums for individuals and families by January 2020 to provide much-needed relief to Coloradans, many of whom are paying up to a third of their income on monthly premiums. Our state, especially the Western slope, has some of the highest health insurance costs in the country.
Reinsurance can be considered insurance for Colorado’s health insurers. The bill will establish three tiers, from the highest cost areas of the state to the lowest cost areas, in order to pass savings on to Coloradans. The first tier, consisting of regions in the state with the highest costs, will experience the greatest reduction in premiums, by 30 to 35 percent. The second tier will experience reductions in premiums by 20 to 25 percent. Finally, the third tier, regions with the lowest costs, will experience reductions in premiums by 15 to 20 percent.
How a reinsurance program works: The reinsurance program will pay a percentage of claims, also known as the coinsurance rate, once the claim reaches the minimum amount required in order to be eligible for reinsurance coverage. This minimum amount is called the attachment point. The program will continue to pay up to an identified claim amount called the reinsurance cap. Claims costs exceeding the cap are not eligible for reinsurance coverage. By insuring this middle range of claims the bill will help reduce risk in the market.
As a result, reinsurance helps drive down costs across the board. The initial premium savings for Coloradans comes from a reduction in the amount paid to hospitals and other providers, which leads to a reduction in the amount paid by health insurers. These savings are then passed along to people purchasing insurance on the individual marketplace.
The state will request a section 1332 waiver from the federal government to implement and help fund the reinsurance program, like eight other states have done to implement similar programs.