August 26, 2020

As recently as March, 2020, before the coronavirus pandemic upended public life, the Colorado legislature was poised to enact significant new health care reforms. That path reflected Governor Jared Polis’ distaste for perceived excessive health care costs, as expressed in the “Commission to Save People Money on Health Care” created in 2019 as one of the Governor’s first post-inaugural acts.

Now, in the midst of the COVID-19 crisis, the immediate context has changed but underlying issues of health care affordability and access remain. Well-deserved public gratitude for front-line providers and support for embattled hospitals abound. For the moment, ambitious plans to change the health care system have been quarantined. However, a resurgence of reform efforts seems likely post-pandemic or during the next phase, whether on a state if not an eventual federal level.

In these circumstances, Colorado’s own “public option” proposal warrants review as a possible base-line for future initiatives changing the delivery and reimbursement systems. Amid many discussions of improved access and affordability, the scope of these concepts remains largely undefined and the source of future controversy.

The Colorado Public Option

On November 15, 2019, the Colorado Division of Insurance (DOI) and Department of Healthcare Policy and Financing (HCPF) (the “Agencies”), jointly issued their “Final Report for Colorado’s Public Option.” Prompted by prior statute and supported by a RAND Corporation white paper titled “Prices Paid to Hospitals Are High Relative to Medicare and Vary Widely,” the Agencies’ Report directly challenged hospital prices, as well as supposedly excess profits generated by Front Range hospital systems. These accusations were not finally resolved before COVID-19 brought matters to a screeching halt.

Format of the Agencies’ Proposal

Initially, the so-called “Colorado Option” was to apply only to the individual health care marketplace, and then expand to the small/medium employer arena. Notably, the Agencies expressly contemplated that such discounted rates paid to hospitals would also be leveraged by other third party payers to negotiate lower hospital reimbursement across a broad spectrum of covered lives.

As unveiled, the Colorado Option differs from the “typical” public option rubric, which permits auto-enrollment or buy-in to Medicare or Medicaid, as applicable. Rather, the proposed Colorado Option is a public-private arrangement whereby licensed insurers would expand their business by offering lower-cost coverage to consumers, including persons within or outside of Connect for Colorado, the state’s Affordable Care Act (ACA) health benefits exchange providing subsidized coverage for eligible persons. The Colorado Option would be administered by licensed carriers, not a buy-in arrangement to a state Medicaid or public employee plan. This hybrid insurance vehicle was touted by the Agencies for its presumed administrative efficiency and lower cost.

Significantly, the Report proposes strict formula-driven limits on hospital reimbursement which were reflected in the 2020 legislative proposal, noted below. This included a base hospital rate of 155% of Medicare as a means to control health care costs. Such stringent rate regulation could profoundly change Colorado’s health care sector and affected communities in many respects.

The State-Sponsored Proposal

Shortly before the pandemic shutdown in March, 2020, House Bill 20-1349 was introduced in the General Assembly. The proposed statute incorporated similar themes as were previously advanced by HCPF and DOI in the Agencies’ Report. Although, House Bill 20-1349 was eventually abandoned in the COVID-shortened legislative session, the basic proposal remains available for future consideration by the legislature.

Who Will Pay for Better Coverage and How?

Good intentions notwithstanding, the ACA has not yet achieved lofty goals of providing accessible and affordable health care coverage for many people. Severe cost-sharing barriers limit affordability and availability of care for many persons and families not qualifying for ACA subsidies. Others criticize hospitals’ role in generating supposedly excessive profits, although the facts on review vary greatly in different situations and communities.

In contrast to House Bill 20-1349 and its proposed rate regulation of hospitals, others (e.g., the Colorado Hospital Association) have argued for a “total cost of care” financing approach which monitors, controls and adjusts relevant actors’ behavior (including insurers and drug companies) in a coordinated manner which benefits the overall community going-forward.

The Impending Health Care Battlefield and Next Steps

In today’s environment, issues of affordability and access have grown more extreme. Amid widespread loss of employer-based coverage, Colorado’s expanded Medicaid enrollment is projected to add 500,000 persons. While appreciating the sacrifice and effort of physicians, nurses and other front-line personnel, the public demand for better coverage, both for COVID-19 (including complications) and otherwise, seems likely to surge in the near future.

Anticipating likely change, hospitals and other affected providers should consider their cost and charge structures which may be affected by future legislative and regulatory changes. It is possible, if not likely, that some form of rate regulation akin to House Bill 20-1349 may eventually be debated or ultimately imposed – the underlying malady remains uncured.

In this context, generating a defensible factual record to challenge possible assessment of arbitrary rates through future government action may be proactive and valuable. Colorado’s Administrative Procedure Act (APA) protects affected entities against arbitrary and capricious conduct, even when conducted under the rubric of the “public good.” However, the APA is not self-executing and does require active involvement by affected entities within strict time requirements to be effective.


This is a time of great challenge and change for the health care community, and attention to legal and regulatory details will be important for future success. While other ideas will likely surface as well, the Colorado Option (or some variant) remains a potential alternative that mandates close attention in the unique new environment.