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The Colorado Option – The Next Staging Ground for Health Equity?

Published:September 21, 2022DOI:https://doi.org/10.1016/j.amjmed.2022.08.038
      Colorado is the first state in the nation to successfully secure a Section 1332 State Innovation Waiver from the Centers for Medicare & Medicaid Services (CMS) intent on creating a public option-style health plan.

      Centers for Medicare and Medicaid Services. 1332 Colorado Amendment Approval and STCs. June 23, 2022. Accessed August 10, 2022. https://drive.google.com/file/d/1kit2dTQWVQcsEF058eaFd516BoEL4qfu/view?usp=embed_facebook

      Known as the “Colorado Option,” the plan thrust the debate on the public option into the limelight yet again. The public option, a public health insurance plan that is to be offered in the online healthcare marketplaces alongside private plans, aims to expand coverage by offering consumers lower premiums. Creating a national public option in keeping with the Affordable Care Act (ACA) became a cornerstone of President Biden's domestic healthcare agenda. In theory, introducing this added competition into the insurance marketplace could lead to reductions in the premiums paid to private plans. A public option plan would maintain its competitive advantage over private plans by dint of its not-for-profit nature and its ability to set publicly-determined provider rates lower than those offered by commercial counterparts. It is the objective of this Perspective to examine the promise of the Colorado Option and other state-based public-option style initiatives in the promotion of health equity.
      Section 1332 of the ACA makes it possible for states to develop innovative health insurance strategies that retain the basic provisions of the law. State applications are reviewed by CMS to determine if the coverage offered by the state equals that which was provided absent the waiver. Successful waiver applications must meet three requirements: “provide coverage and cost-sharing protections against excessive out-of-pocket spending” comparable to without the waiver, will cover a similar number of state residents, and will “not increase the federal deficit.” States that have secured a 1332 waiver are eligible to receive federal “pass-through” funding, that is, grants awarded based on federal savings achieved by the state's waiver program.
      Heretofore, states have been seeking 1332 waivers with an eye towards developing reinsurance programs. By providing a more affordable coverage option and by reducing commercial health plan premiums through market competition, the Colorado Option is able to reduce federal spending on the ACA tax credits. Actuarial estimates for 2023 predict federal savings of $213.8 million by the “Colorado Option” assuming a 5% premium reduction target.

      Centers for Medicare and Medicaid Services. 1332 Colorado Amendment Approval and STCs. June 23, 2022. Accessed August 10, 2022. https://drive.google.com/file/d/1kit2dTQWVQcsEF058eaFd516BoEL4qfu/view?usp=embed_facebook

      These savings, in turn, will be captured by Colorado's 1332 waiver and funneled to provide state premium subsidies for Coloradans enrolling in individual Colorado Option plans. Colorado's novel use of the 1332 waiver foreshadows increasing numbers of states pursuing this same path. Indeed, several states have submitted or are preparing to submit 1332 waiver applications to CMS including Washington, Oregon and Vermont. Sixteen other states have announced plans to create a public option-style program.

      Cascade Select: Insights From Washington's Public Option. Health Affair Forefront, August 30, 2021. Accessed August 10, 2022. https://www.healthaffairs.org/do/10.1377/forefront.20210819.347789/

      This incoming flurry of action around state public option plans raises the all-important question of whether these programs are effective at meeting their stated goals of assuring affordability and equity.
      To date, three states, Washington, Colorado, and Nevada, have enacted public option health plans. Washington's Cascade Care plan went into effect in 2021. Assessment of Washington's Cascade Care reveals low enrollment and participation, with a public option plan available in 49% of the counties and being the cheapest option in 47% of those counties, most of which have already enjoyed lower provider payment rates and lower premiums. Further, only 0.8% of enrollees chose a public option plan, likely due to voluntary participation by private insurers and providers, as well as to auto-reenrollment policies.
      • Sen AP
      • Singh Y
      • Meiselbach MK
      • Eisenberg MD
      • Anderson GF
      Participation, Pricing, and Enrollment in a Health Insurance “Public Option”: Evidence From Washington State's Cascade Care Program.
      This reality led to the reimagining of the program as Cascade Care 2.0 wherein state premium subsidies were added and providers required to enter Cascade Care networks.
      To avoid the aforementioned mistakes, Colorado will require all private insurers to offer the Colorado Option in every individual or small business marketplace. The state also intends to set premium-reduction targets relative to 2021 that will start at 5% in 2023, and rise to 15% in 2025.

      Centers for Medicare and Medicaid Services. 1332 Colorado Amendment Approval and STCs. June 23, 2022. Accessed August 10, 2022. https://drive.google.com/file/d/1kit2dTQWVQcsEF058eaFd516BoEL4qfu/view?usp=embed_facebook

      To offset low provider participation, the Colorado Insurance Commissioner will order provider participation in public option networks when and if providers are not complying with the law. Taken together, the Colorado Option is estimated to expand enrollment to 10,000 individuals and reduce statewide premiums by 14% on average by 2023.

      Centers for Medicare and Medicaid Services. 1332 Colorado Amendment Approval and STCs. June 23, 2022. Accessed August 10, 2022. https://drive.google.com/file/d/1kit2dTQWVQcsEF058eaFd516BoEL4qfu/view?usp=embed_facebook

      A key assumption being made in resolving to reduce premiums is that a reimbursement cap will force hospitals to operate in a more efficient manner. However, prior cost-controlling measures such as the Medicare Shared Savings Program (MSSP) revealed that provider groups may avoid caring for high-risk beneficiaries by contracting with fewer clinicians with high risk patient panels or by strategically using the attribution methodology to reduce the number of high-risk beneficiaries attributed to them in the program.
      • Markovitz AA
      • Hollingsworth JM
      • Ayanian JZ
      • Norton EC
      • Moloci NM
      • Yan PL
      • et al.
      Risk adjustment in Medicare ACO program deters coding increases but may lead ACOs to drop high-risk beneficiaries.
      In addition, reductions in private payment rates may compromise hospitals who operate on narrow margins such as rural or safety-net hospitals. One potential solution to the aforementioned challenges is to incorporate one-time adjustments for hospitals in the lowest reimbursement rates category. Rhode Island's “Affordability Standards,” a provider price growth cap, incorporated a one-time adjustment for inpatient services to hospitals that are paid below the median to address disparities in payment.
      • Hwang A
      • Lischko A
      • Betlach T
      • et al.
      Cap Provider Payment Rates or Rate Increases Cost Driver Targeted: Provider (primarily hospital) prices.
      One potential substitute for a public option is the “Medicaid Buy-In” proposed in Oregon, New Mexico, and Vermont.

      Cascade Select: Insights From Washington's Public Option. Health Affair Forefront, August 30, 2021. Accessed August 10, 2022. https://www.healthaffairs.org/do/10.1377/forefront.20210819.347789/

      This approach allows individuals who are currently ineligible for Medicaid the opportunity to purchase state Medicaid coverage on the online exchanges. State Medicaid constitutes an existing insurance infrastructure that can be built upon and will allow for greater leverage in negotiation with providers and insurers. Further, Medicaid Managed Care Organizations are unique in their ability to address social barriers to care through enhanced care coordination and community outreach benefits. This is a seemingly promising avenue for states to deploy in their 1332 waiver programs. However, such strategy may also lead to a greater cost burden for the state which could result in a “Medicaid Buy-In” facing political hurdles.
      While the “Medicaid Buy-In” model builds health equity benefits, the marketplace-based plans are also developing health equity requirements. The Colorado Option plan includes requirements for developing culturally responsive provider networks, contracting with certified midwives and community health workers, and mandating anti-bias training for all care providers. Further, standardized benefits are to include free primary care, mental health visits, prenatal and postnatal care, and diabetic supplies.

      Centers for Medicare and Medicaid Services. 1332 Colorado Amendment Approval and STCs. June 23, 2022. Accessed August 10, 2022. https://drive.google.com/file/d/1kit2dTQWVQcsEF058eaFd516BoEL4qfu/view?usp=embed_facebook

      State public option plans have outlined several steps towards improving equity (Table 1) that should be maintained.
      Table 1State Public-Option style laws and proposed health equity measures.
      StateColoradoNevadaNew MexicoOregonWashington
      BillHB21-1232SB - 420SB - 405SB - 770
      StatusLaunch Jan 1, 2023Launch Jan 1, 2026ReportReport deliveredLaunch Jan 1, 2021

      2.0 Launch Jan 1, 2023
      Public-Private or Buy-in ProgramPublic-PrivatePublic-PrivateBuy-inBuy-inPublic-Private
      Premium Reduction PlanInsurer must offer premium reductions of 5% in year 1, 10% in year 2, and 15% in year 3

      Additional state premium subsidies from 1332 waiver funding
      Premiums in each zip code must be 5% lower than reference premium, and average public option premiums must be 15% lower than average referenceMedicaid+ provider payment ratesPublicly mandated premium reductionsProvider reimbursement rate cap: 160% Medicare rates

      Health Equity InitiativesNetwork adequacy rules

      Available to undocumented immigrants

      Required to contract with certified midwives and community health workers
      Rate floor for FQHC or Rural health clinic must be comparable to CMS Prospective Payment SystemAffordability scale for cost-sharing and premiums based on household income

      Consult with representatives of Native American nations of New Mexico
      Planned outreach to: low-income residents, those with unstable employer-sponsored insurance status, and those who face significant access barriers

      Coordinated Care Model (Medicaid Coordinated Care)

      Health Equity board member mandate for insurers
      135% Medicare rate payment floor for primary care

      101% Medicare rate payment floor for rural hospitals

      Additional state premium subsidies for low-income individuals
      What is becoming more apparent is that affordability and equity are not synonymous, and that there exists a greater need to emphasize equity in plan designs from the very outset. The public-private partnership model is politically favorable. Extending the Medicaid Coordinated Care model and health equity requirements to all insurers harbors the potential to ensure that the benefits of a “Medicaid Buy-In” may also materialize.
      State health reform will ultimately drive the national health policy discussion. Importantly, Colorado's Section 1332 State Innovation Waiver signals the federal government's willingness to participate in state public option programs, irrespective of the complex political environment. The “Colorado Option” is one seemingly effective use of the 1332 Waiver to improve healthcare affordability. Its impact on equity, however, should not be assumed. Colorado's trailblazing steps should serve as a clarion call for all states to embark on further public option experiments to refine cost-controlling and equity-promoting mechanisms of a public option health insurance plan.

      Funding/Support

      None

      Financial Disclosures

      Professor Adashi and Mr. Kumar declare no conflict of interest.
      All authors had equal access to the data and played a role in writing and editing the manuscript.

      References

      1. Centers for Medicare and Medicaid Services. 1332 Colorado Amendment Approval and STCs. June 23, 2022. Accessed August 10, 2022. https://drive.google.com/file/d/1kit2dTQWVQcsEF058eaFd516BoEL4qfu/view?usp=embed_facebook

      2. Cascade Select: Insights From Washington's Public Option. Health Affair Forefront, August 30, 2021. Accessed August 10, 2022. https://www.healthaffairs.org/do/10.1377/forefront.20210819.347789/

        • Sen AP
        • Singh Y
        • Meiselbach MK
        • Eisenberg MD
        • Anderson GF
        Participation, Pricing, and Enrollment in a Health Insurance “Public Option”: Evidence From Washington State's Cascade Care Program.
        The Milbank Quarterly. 2022; 100: 190-217
        • Hwang A
        • Lischko A
        • Betlach T
        • et al.
        Cap Provider Payment Rates or Rate Increases Cost Driver Targeted: Provider (primarily hospital) prices.
        The Commonwealth Fund, New York2022 (FebruaryAccessed August 10, 2022)
        • Markovitz AA
        • Hollingsworth JM
        • Ayanian JZ
        • Norton EC
        • Moloci NM
        • Yan PL
        • et al.
        Risk adjustment in Medicare ACO program deters coding increases but may lead ACOs to drop high-risk beneficiaries.
        Health Aff (Millwood). 2019; 38 ([PMID: 30715995]): 253-261https://doi.org/10.1377/hlthaff.2018.05407