Why every public rate hearing for the Colorado Option health insurance plans got canceled

A highly anticipated showdown between Gov. Jared Polis' administration and the health care industry won't take place this year.

The expected faceoff had to do with the Colorado Option, a Polis-backed initiative to push private insurance companies and hospitals to provide better care at cheaper prices — or else. The marquee bit of regulatory gladiatorship was to occur during public rate hearings, when officials from the state Division of Insurance could battle insurers over why their plans cost so much.

To get the cost of those plans lower, Colorado Insurance Commissioner Michael Conway could use the hearings to exercise his authority to do something unprecedented — he could have set a limit on how much hospitals could charge patients who are covered by Colorado Option plans.

But the first rate hearing for the Colorado Option fizzled, and others soon began to follow. Late last month, Conway vacated the last hearing still on the schedule, one for insurer Rocky Mountain HMO.

Supporters of the Colorado Option heralded the cancellations as a win for the initiative.

"It's great news for Colorado families who have been struggling with the rising cost of health insurance," Adam Fox, the deputy director of the Colorado Consumer Health Initiative, said in a statement.

A quick refresher to understand why Fox and other supporters believe that: The Colorado Option is a state government-designed health insurance plan that private insurance companies have to sell at lower prices. To achieve those lower prices, the state sets rate targets every year.

This year, nearly every insurer said they couldn't meet those targets on at least some of their Colorado Option plans — triggering the rate hearings, where public comment would have also been allowed. But, as the hearings drew closer, at least one insurer and hospital system renegotiated their rates, while others provided more detail on how much they were charging and why.

So, the reason the hearings won't take place is pretty simple: There's nothing Conway could learn from them or do after them to reduce prices even lower. Every hospital named in a complaint said they had already reduced their prices as much as required by law.

"This year's public hearing process has shown us that the hearings are an effective tool to get companies and health care providers to negotiate lower reimbursement rates," Vince Plymell, a spokesman for the state Division of Insurance, said in a statement.

Insurance industry advocates saw it differently. Saskia Young, the executive director of the Colorado Association of Health Plans, an industry trade group, said in a statement: "Carriers had already negotiated hospital reimbursement rates that were in many cases lower than those set forth in the law, meaning the crux of the public option's promise to lower premiums by forcing down hospital reimbursement rates failed."

Hospitals also said the hearings had little if anything to do with the rates ultimately agreed upon between insurers and health care providers.

"I don't think it brought anyone to the table," Tom Rennell, the senior vice president for financial policy and data analytics at the Colorado Hospital Association, said in an interview. "I just think it caused a lot of extra administrative work."

Rennell specifically objected to how hospitals got roped into the hearings. While one insurer filed a complaint alleging that one hospital system's prices were too high, most of the complaints against hospitals were filed by staff at the Division of Insurance. Rennell said hospitals don't believe the Colorado Option law gives the state that authority.

The administrative cost that the complaints placed on hospitals "does not support the goal of lowering health care costs for Coloradans," he said. Rennell said he hopes state regulators have clearer expectations and policies in place for next year's potential hearings.

There is also an important caveat: The fact that this year's hearings got canceled does not necessarily mean that the insurers will meet their Colorado Option price targets. Even with hospital prices as low as the state could possibly set them, insurers may still miss the targets for a number of reasons, such as prescription drug costs or higher inflation than the state takes into account when setting the price targets.

Final 2024 rates won't be determined until later this year — and this is where people can still have input.

The Division of Insurance will hold opportunities for public comment on proposed Colorado Option rates this week. The hearing for the individual market rates will be July 7, while the hearing for the hearing for the small group market rates will be July 6.More information on how to participate in those hearings is available on the Division of Insurance website.