Market rate setting for Colorado’s public insurance program is better for hospitals, but is it still a “public option?” – State of the reform


This year revived public options bill in Colorado will contain key differences from last year’s version, in particular by allowing the market to set prices instead of the government. Katherine Mulready, senior vice president and chief strategy officer for the Colorado Hospital Association (CHA), said the updated bill is a “step in the right direction” toward a workable public option, but the association remains hesitant about some of its technical details.

“I think one of the concerns, generally speaking, when we talk about a ‘public option,’ is that we’re talking about some sort of monolithic affordability proposition, and the reality is that this one is different from that of last year. It’s different from what other states look like.

Although there is no draft of the bill yet, which makes some details unclear, Mulready said she had several informative conversations with the bill’s sponsors, Senator Kerry Donovan and Rep. Dylan Roberts. She offered CHA’s perspective on the potential for a public option in the state.

“There’s kind of a two-phase approach. In the first phase, they would basically set a goal and let the market determine how to achieve that goal. The goal, as they envisioned it, is to reduce premiums. So whether the Legislature sets this in partnership with us or on its own, if we can meet the premium reduction target that it set, then phase two never happens. So basically, if the market can meet the targets, then it doesn’t really need the public option, or what it calls “phase two.”

She noted that the addition of the market in the bill raises questions about whether it still qualifies as a “public option.”

According to Mulready, one of the most critical differences in this year’s bill will be how its price is determined.

“One of the most significant changes between last year’s proposal and this year’s proposal is that last year’s proposal would have relied exclusively on government rate setting, which we were very opposites. This year’s proposal begins with a market-based solution.

A specific problem CHA had with last year’s version of the bill was that it only applied government pricing to hospitals – meaning two-thirds of their premiums would go somewhere other than hospitals.

“In last year’s proposal, we had very little confidence in how they described how the rates would actually be set and whether these would be sufficient. We are generally not convinced that the state has the appropriate level of expertise to impose market-based tariffs that are not based on negotiation, are not as dynamic as market-based tariffs, and are overly prescriptive.

She said the ACH still had lingering questions about the details of the new market involvement in the program. For example, it is unclear whether prices will vary from region to region.

Mulready said this year’s changes may have been the result of comments from organizations like the ACH expressing their opposition to government rate-setting. According to her, it is too early to say if there is a clear path for the public option.

Colorado legislature set to reconvene Tuesday.


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