Romer: The Economic Risks of the State Health Insurance Option

This story first appeared in the Vail Daily on December 12, 2019.

The administration of Gov. Jared Polis unveiled a new plan for changing Colorado’s health care sector. The plan would create a so-called public option — a state-run insurance program — that offers the promise of lower premiums. Details of the plan can be found at Proposal for Affordable Health Coverage Option.

We join business groups and associations around the state in applauding the renewed focus policymakers and elected officials have placed on ensuring every Coloradan has access to affordable, quality health coverage and care. However, the “state option” proposed by the Division of Insurance and Department of Health Care Policy & Financing seems to be a step in the wrong direction that could have grave consequences.

Locally, we are making progress toward lowered health care pricing and lowered insurance rates through the Mountain Healthcare Coalition, an enabling nonprofit with Vail Valley Partnership as the backbone entity and Vail Health playing a leadership role. Together, we are focused on enhancing access to affordable and high-quality care for our local community. Modeled after Summit County’s Peak Health Alliance, we’re convening stakeholders and developing local discount programs.

Meanwhile, the state option is expected to cut at least $235 million of reimbursements to health care providers in the first year and by as much as $1.5 billion within five years. That will likely exacerbate a growing shortage of health care workers and force many providers to reduce services. As a result, patients will have to travel further, wait longer and have fewer providers to choose from when they need care the most.

The impact would be particularly damaging for rural residents. A Navigant Research study in August of this year notes that a “public option could negatively impact access to and quality of care through rural hospitals’ potential elimination of services and reduction of clinical and administrative staff, as well as damage the economic foundation of the communities these hospitals serve.” The report indicates nearly one-in-three rural Colorado hospitals could be forced to close.

Rate setting reimbursements may also force carriers to shift costs onto other insurance groups, which will increase costs for those who currently have private insurance. The Colorado Hospital Associations notes that the state option may increase health insurance costs for more than half of residents.

The state option would have significant economic consequences. A study by the REMI Partnership that considered a similar program found cost-shifting onto the employer-sponsored market would increase health care costs more than 5 percent for businesses. Additionally, the final report of the state option failed to evaluate eligibility criteria for small businesses to participate or the impact on the small-group market as mandated by HB19-1004. As a result, the true impact on Colorado’s small business community is largely unknown.

The risks of a state option are too great to move forward with so many unknowns. The proposal does not provide thorough economic impact analysis, nor does it consider the impacts on access to and quality of care. Additionally, as stated in the initial report, the state option will rely on unsecured funding sources, including federal waivers, state funds and “other levers” — which, if not realized, could create potentially immense tax burdens on all Coloradans.

The state should slow down and retract the state option proposal, conduct a full cost-benefit analysis, and invite greater input and review. The consequences are too great for Colorado to go it alone with so much uncertainty left unanswered. We’ll explore the negative impacts to small businesses in future columns.

Chris Romer is president and CEO of Vail Valley Partnership, the regional chamber of commerce. Learn more at VailValleyPartnership.com.