EDITORIAL: Legislators seek to impose a state health care plan

Jan. 3--Expect to hear a lot about the "public option" for health insurance, after the Colorado Legislature convenes Wednesday. It would give the small percentage of Coloradans who buy insurance on the open market the option of a quasi-state policy sold by private insurers.

The whole thing began during last year's left-gone-wild legislative session, in which Democratic majorities in the House and Senate passed House Bill 1004. It instructed Gov. Jared Polis and his administration to develop a new type of insurance that would significantly increase the state government's role in health care.

The Colorado Department of Regulatory Agencies and the Department of Health Care Policy and Financing issued a proposed state option in October for legislators to consider this year.

Consumers should be wary any time the government wants to further inject itself into a health care mess created and sustained, at least in part, by excessive government entanglement in market transactions. Public and private third-party payer schemes have detached health care providers and consumers from traditional market constraints that keep prices in check. More interference could cause additional problems.

A draft of the proposal outlines a law that requires health insurers in Colorado to offer the state option at low premiums. It imposes price controls on providers, with reimbursements "benchmarked to Medicare." It hints at forcing providers to participate.

"A successful State Option will require (emphasis ours) that all stakeholders come to the table to do their part to deliver affordable health care to Coloradans," the proposal states. "...the state may implement measures to ensure health systems participate and provide cost-effective, quality care to covered individuals."

The proposed law would require insurance carriers to use 85% of premiums paid into the state plan for patient care. Money for overhead would have to come out of the remaining 15%.

It sounds pretty good on the surface. The state will force insurers to offer affordable plans that seemingly favor patients over providers and third-party payers.

The concern involves the law of unintended consequences. Price controls on oil caused gas lines in the 1970s. Rent control dramatically reduces the number of rentals on the market. So it stands to reason a group of well-established Colorado business leaders, organized as the REMI Partnership, studied the proposed state option and found major concerns. Those include:

-- Government price controls could reduce reimbursements to health care providers from $494 million up to $1.4 billion.

-- To cover the loss, health care providers could reduce the health care workforce by up to 4,500, exacerbating the state's shortage of primary care physicians, nurses and other health care providers.

-- Lost revenues caused by the state option could shift to employer-provided insurance. If so, it could cost the state between 2,900 and 8,320 jobs. That would translate into a GDP loss of $320 million to $919 million.

-- The law could cause an 80% to 100% membership loss in the individual health insurance market as people drop private coverage in favor of the state option's below-market premiums.

Before imposing this on Colorado, legislators should consider whether most consumers want or trust it. A survey of 800 registered Colorado voters in November found only 45% support a public option. A whopping 73%, including 61% of Democrats, prefer improving the system we have instead of creating a state option. Only 34% say they trust the state government to design an effective plan. Nearly 80% are "unwilling" to pay extra for their health care to help fund a government plan.

Although the proposal suggests no tax, insurers will almost certainly recoup losses by increasing premiums on private insurance plans. It means average, hard-working Coloradans get the bill for another health care entitlement from which they derive no benefit.

Like any bill the Legislature considers, details will determine whether this idea should pass or fail. As proposed, it looks like another well-intended cost-shifting plan that could further destabilize our fragile health care market.

The Gazette Editorial Board

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