The state’s finalized proposal for a new public health insurance option expected to lower insurance costs was released last week but leaves some questions unanswered about how it will function.

The new public insurance option could lower premiums for consumers purchasing personal health insurance on the state health exchange by 10% on average across the state, according to the proposal. Rural western Colorado could see 15% savings.

“Everything about our recommendation is focused on making health care more accessible and affordable for Coloradans,” said Colorado Insurance Commissioner Michael Conway, in a news release late last week. “To do that we must build a system that tackles the costs of care and brings more logic into the process.”

The public options could be available to individuals in 2022. Eventually, the public health care option is intended to be expanded to include small and medium-sized businesses.

The savings could be achieved by increasing how much insurance carriers must spend on medical care from 80% of insurance premiums to 85%.

The state would also cap how much hospitals could be reimbursed for care through a formula that would be applied on a hospital-by-hospital basis, the proposal says.

The plan details some of the factors that could be in the formula, such as whether the hospital is rural or urban, but it doesn’t suggest a formula for reimbursement.

The savings generated by the new rules are expected to be passed along to consumers by private insurance companies expected to sell the public option through Connect for Health Colorado, the state health exchange. State money would not be spent on providing care through the public option plans.

The plan also aims to ensure that every county has at least two companies offering plans through Connect for Health Colorado to increase competition. Some counties on the Western Slope, such as Montezuma County, have only one option. The plan doesn’t say how increased competition will be achieved.

“Our hope is that health insurance companies will step up to do this of their own accord,” said Vincent Plymell, assistant commissioner with the Division of Insurance.

The Colorado Legislature will review the public option proposal in the coming session and may pass new laws to ensure it can be implemented, the plan says.

The public option could be a big step in the right direction for encouraging affordability across the state and addressing excessive profits hospitals earn, said Adam Fox, director of strategic engagement for the Colorado Consumer Health Initiative.

“Through the public option structure, we can start creating a little bit more accountability from health care providers and insurers to make sure Coloradans aren’t paying excessive health care costs,” he said.

The hospital reimbursement caps proposed are needed, in part, because health care doesn’t function like a traditional marketplace for goods and services. Particularly in small rural communities, health care tends to function more like a monopoly, he said.

“You don’t exactly have a choice when you have a medical emergency,” he said.

However, the Colorado Hospital Association opposes capping reimbursement for care, spokeswoman Julie Lonborg said in an email to The Durango Herald.

“By establishing government price controls and forcing insurers and hospitals to participate, the proposal as submitted has the potential to undermine other affordability efforts underway, especially community-based solutions and value-based care,” she said. “Instead, Colorado needs a solution that looks broadly at total health spending and the entire health care system, fostering partnership to collaboratively drive down costs.”

State Sen. Don Coram, R-Montrose, said the public option’s focus on those who purchase insurance through the exchange was too narrow. He would like to see health care reform similar to that proposed by the Southwest Health Alliance, which aims to lower insurance costs for all residents in Southwest Colorado by negotiating directly with health care providers.

The Southwest Health Alliance model is based on a successful effort by Peak Health Alliance that lowered costs for residents in Summit County.

“I think it’s head and shoulders above what anything the state is going to come up with,” Coram said.

mshinn@ durangoherald.com