Proposed formula will save Coloradans up to 20% on premiums in the individual market.
DENVER (March 6, 2020) – Today, the Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA) and the Department of Health Care Policy and Financing provided the expected reimbursement rates for all Colorado hospitals under the proposed Colorado Affordable Health Care Option (HB20-1349). These reimbursement rates are derived from a proposed formula developed by the DOI and the Department of Health Care Policy & Financing as the final part of the recommendation delivered to the Legislature as required by HB19-1004.
“This formula provides fair reimbursement rates to hospitals across the state while also ensuring a reduction in premiums for Coloradans who would buy the Colorado Affordable Healthcare Option. Colorado has the 5th highest hospital prices and the 2nd highest hospital profits in the nation. At the same time, this formula is responsive to the fact that our critical access and independent hospitals are pillars in our communities, especially in rural parts of the state,” said Michael Conway, Colorado's Commissioner of Insurance.
On average, Colorado hospitals are able to cover their costs when they are reimbursed at 143% of Medicare rates. This number is calculated from annual data that Colorado hospitals submit to the Colorado Hospital Association (CHA). CHA submits this data to the Colorado Health Care Affordability Sustainability Enterprise (CHASE) board, which includes the data in an annual report. The formula sets a base rate at 155% of Medicare rates, then considers a number of unique characteristics of each individual hospital to increase the reimbursement for that hospital.
- Is the hospital Independent or Critical Access? (20% increase for one of these, or 40% for both)
- Does the hospital serve a high percentage of Medicare or Medicaid patients? (Up to 30% increase for having a high share of such patients)
- Does the hospital do a good job managing administrative costs, the underlying costs of care, and/or are they already charging reasonable rates? (Up to 40% increase)
This formula is applied on a hospital by hospital basis, to establish the maximum reimbursement rate for that hospital. The amount is described as a percentage of the payment rate that each hospital receives from Medicare.
Examples:
These examples work through the base rate of 155% of Medicare rates, adding in the percentage increases for each hospital’s unique characteristics, arriving at the expected reimbursement rates for the Colorado Affordable Health Care Option.
Denver Health Medical Center
Per the formula, Denver Health gets 20% added to the 155% base for being an independent hospital. Then 12% is added for having a high percentage of Medicaid / Medicare patients, and then another 21% for managing the underlying costs of care.
Boulder Community Health
Boulder Community Health gets 20% added to the 155% base for being an independent hospital. Then 18% is added for managing the underlying costs of care.
Montrose Memorial Hospital
Montrose Memorial gets 20% added to the 155% base for being an independent hospital. Then 12% is added for having a high percentage of Medicaid / Medicare patients, and then another 25% for managing the underlying costs of care.
San Luis Valley Health Conejos County Hospital
Conejos County Hospital gets 40% added to the 155% base for being both a critical access hospital and an independent hospital. Then 15% is added for having a high percentage of Medicaid / Medicare patients, and then another 15% for managing the underlying costs of care.
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The Colorado Division of Insurance (DOI), part of the Department of Regulatory Agencies (DORA) regulates the insurance industry and assists consumers and other stakeholders with insurance issues. Visit dora.colorado.gov/insurance for more information or call 303-894-7499 / toll free 800-930-3745.
DORA is dedicated to preserving the integrity of the marketplace and is committed to promoting a fair and competitive business environment in Colorado. Consumer protection is our mission. Visit dora.colorado.gov for more information or call 303-894-7855 / toll free 1-800-886-7675.
The Department of Health Care Policy and Financing administers Health First Colorado (Colorado's Medicaid Program), Child Health Plan Plus and other programs for Coloradans who qualify. For more information about the Department, please visit Colorado.gov/hcpf.