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                                           February 2, 2009
                                           SB 08-217 Report

1. Executive Summary

Colorado faces an enormous challenge in assuring access to health care for all of its citizens. There are
well documented problems of cost, quality, and access. Of particular concern are the 700,000
Coloradoans without health insurance. It is well documented that people without insurance do not
receive appropriate health care.

Last year, the 208 Commission reported on the results of their yearlong process trying to understand
and address these issues. Senate Bill 08-217 built on those recommendations by studying practical steps
to provide coverage to some of Colorado’s uninsured residents through low cost, state subsidized value
benefit plans called “Centennial Care Choices.”

The Centennial Care Choices Panel has worked for six months to evaluate the impact of this solution. It
is not the Panel’s responsibility to weigh in on whether value benefit plans themselves are good public
policy. The Colorado Legislature determined that these plans represent a strategy worth exploring
when it passed Senate Bill 08-217. Instead, the Panel has endeavored to provide expert opinion on what
policy changes would be needed to make value benefit plans reduce the number of uninsured
Coloradoans, and comment on additional strategies that may provide partial solutions to providing
access to coverage and access to care in our state.

2. Introduction

This report is respectfully submitted to the House and Senate Health and Human Services committees of
the Colorado General Assembly by the Department of Health Care Policy and Financing (HCPF) and the
Department of Regulatory Agencies, Division of Insurance (DOI), as required by SB 08-217. Senate Bill
08-217 created a framework for developing the Centennial Care Choices Program, requiring the
Department of Health Care Policy and Financing, in coordination with the Division of Insurance and a
panel of experts, to acquire actuarial projections, research potential cost savings, and develop a request
for information from health insurance companies for a new health insurance product known as a value
benefit plan (VBP).

The purpose of this report is to detail the results of the Request for Information (RFI) process and the
actuarial and cost savings research, including a detailed summary of the information submitted by
health insurance carriers and other interested parties, along with the Department’s and Division’s
evaluation and analysis. The report also includes information regarding policy decisions required should
the General Assembly proceed to implement the Centennial Care Choices Program, VBPs, and a
premium subsidy program.


3. Background

As described in an Interim Report dated December 15, 2008 (included as Appendix 1), on June 24, 2008,
Governor Ritter appointed 19 members to an expert panel to assist the Department of Health Care
Policy and Financing (HCPF) and the Colorado Department of Regulatory Agencies – Division of
Insurance (DOI) in seeking information from the health insurance industry about the development of
value benefit plans. From July through December, the panel has met and provided input on a Request
for Information (RFI) and proposal review process. The RFI was released on October 7, 2008, and eight
responses were received by HCPF on December 2. Seven of these responses were evaluated by the
Panel, the Department, the Division and their consultants.

4. Change in Colorado’s environment since SB 217 was passed

When Senate Bill 08-217 was proposed in March, and even signed in June, Colorado was not yet feeling
the severe negative effects of the current economic environment. While Colorado did not experience
job losses until September (Channel 9 News 1/27/09), according to the National Bureau of Economic
Research, the U.S. economy has been in recession since December 2007.

Now Colorado’s unemployment rate is at its highest level in nearly five years. When people lose their
jobs, they also lose their health insurance. Colorado’s unemployment rate grew by another half point to
5.7 percent in October, the highest in nearly five years. With every 1 percentage point increase in
Colorado’s unemployment rate, 19,000 adults and more than 800 children enter the ranks of the
uninsured. (Unpublished data from the Urban Institute provided to The Colorado Health Foundation
earlier this year).

Some newly unemployed people will become eligible for public health insurance programs like Medicaid
and the State Children’s Health Insurance Program, while others will rely on safety net clinics that serve
the uninsured, or go without needed health care. Colorado experienced a 12% Medicaid caseload
increase in 2008, driven by enrollment of non-disabled, non-elderly clients who would typically be able
to afford and access a private insurance product.

At the same time, the State is seeing significant revenue shortfalls that are forcing lawmakers to make
tough choices. Gov. Ritter presented the legislature’s Joint Budget Committee with recommended
budget cuts on January 15, after directing his department heads and Budget Director Todd Saliman to
prepare plans for a 10 percent, or nearly $800 million, reduction through a combination of
programmatic cuts, cash-fund transfers and utilizing the state's emergency reserve.

State leaders are striving to protect programs we have today, but everything is on the table. This is a
difficult environment to advocate for new programs, particularly something as significant and costly as a
massive subsidy program.

There is already talk at the federal level of helping states meet the increased demand for public
programs by including some health care spending in the next stimulus package. An increase to the
federal matching rate for Medicaid would help shore up this program during the times it is needed most.

As Anne Warhover, Executive Director of the Colorado Health Foundation wrote in a recent Denver
Business Journal editorial:

       Though it’s counterintuitive, the economic meltdown may be the catalyst for meaningful health
       care reform. It’s time to change the way health care is delivered in this country to make it more
       efficient. Health information technology and care coordination hold potential to both increase
       quality and drive down costs. Changing the way we pay for health care is also an important
       component of reforming the system. And finally, we must tackle the problem of the growing
       number of people without health insurance. There are powerful ethical and moral arguments for
       a health care system in which everyone has access to health care. But there is a strong economic
       case as well. The cost to reform our health care system will be significant. But the cost of doing
       nothing could be even greater, in both financial and human terms. We simply can’t afford to do

       Friday, January 16, 2009 | Modified: Tuesday, January 20, 2009, 6:09pm VIEWPOINT: The time
       is right to fix our health care systemDenver Business Journal - by Anne Warhover

Ms. Warhover’s thoughts are consistent with the view of the Centennial Care Choices Panel. The money
to fund state subsidized, mandated, value benefit plans under the framework of Centennial Care Choices
may be even harder to find in the current environment, but the demand for these low cost plan is likely
even higher. The rising number of uninsured Coloradoans emphasizes the need for meaningful
healthcare reform, of which the Centennial Care Choices program may be a part.


5. Key Findings

While none of the experts on the Panel believe that Centennial Care Choices is “the” solution to health
care reform in our state, it could provide a partial solution to some people who are currently uninsured.
Following are the key findings from the Value Benefits Plan Request for Information process:

           The private health insurance sector is willing to help the State find a solution to the
            problem of the uninsured.

           The health care experts that made up the Centennial Care Choices Panel, in addition to the
            health plans and interested parties that responded to the RFI, struggled with the question:
            “Is something better than nothing in providing insurance coverage for Coloradoans who
            are currently uninsured?”

           The large price tag needed to provide the subsidies that would make Centennial Care
            Choices Value Benefit Plans affordable is the primary barrier to implementing the

           The Request for Information Process and the analysis and evaluation undertaken by staff
            and the panel of experts resulted in some worthwhile next steps that can continue moving
            Colorado’s health care reform discussion forward.

Below, each of these findings is discussed in more detail.

The private health insurance sector is willing to help find a solution to the problem of the uninsured.

The following companies participated in a response to the Request for Information:
             Celtic Insurance Company (subsidiary of Centene Corporation)
             Colorado Access
             Colorado Choice Health Plans (dba San Luis Valley)
             Cover Colorado
             Delta Dental
             Kaiser Permanente
             Pinnacol Assurance
             Rocky Mountain Health Plans
             United Health Group

Anthem BCBS also submitted a response which was not considered in the analysis and evaluation
because it did not comply with the requirement of SB 217 to limit the characteristics used in
determining premium rates exclusively to the age of individuals to be covered under the VBP and the

geographic location of the policyholder. Rates for Anthem’s SmartSense 1500 VBP were determined by
age, geographic location, and initial health status.

Panel members, staff and other observers initially had concerns about whether health plans and other
interested entities would participate in the process due to concerns about making public proprietary
information and strategies. That was not the case for the ten organizations that shared in developing
responses for the Panel. Their responses show that the insurance industry can develop health insurance
products that are less expensive, and provide primary and preventive care without large out of pocket
costs. However there were clearly tradeoffs in terms of other benefit categories, deductibles, and
coinsurance that are too costly for many of Centennial Care Choices’ potential clients. More detail from
the RFI responses is discussed in Section 7.

Regardless of personal opinions about the usefulness of specific Value Benefit Plans, the RFI process was
clearly important in terms of creating a dialogue and understanding roles, information needs, and
concessions that can be made in the development of a true public private partnership.

The health care experts that made up the Centennial Care Choices Panel, in addition to the health
plans and interested parties that responded to the RFI, struggled with the question: “Is something
better than nothing in providing coverage to Coloradoans who are currently uninsured?”

According to a recent national survey, among the uninsured, 76 percent said that someone in their
family didn’t see a doctor during the past year when they were sick because of cost, and 57 percent of
the uninsured said they had to choose between paying medical costs or their rent, mortgage or utilities
(High Costs Force Third of Americans to Skip Needed Health Care – AFL-CIO report found 95 percent of
those surveyed feel U.S. system needs overhaul By Steven Reinberg Posted 3/25/08

Low cost limited benefit plans can offer a solution for uninsured citizens struggling with these tradeoffs.
Of the seven VBPs analyzed through the RFI process, five offered access to primary and preventive care
with very low, or no out of pocket costs. For example benefit designs included:
         no deductible on office visits, lab, drugs
         no deductible on preventive office visits
         no cost sharing on preventive services
         no cost sharing on prevention or PCP visits for evaluation and management

           no charge for appropriate physicals, lab work, immunization, and prenatal care

While the panel and the companies that responded to the RFI understand that for many people, low
cost primary and preventive care won’t meet all their needs, it can, in many cases, keep currently
uninsured patients out of the Emergency Department or operating room.

However, in providing this basic level of services in an affordable manner, VBPs make other benefit
categories expensive through deductibles, copayments, and coinsurance, making participants gamble
that they won’t need these higher cost services, and putting at financial risk the citizens that can least
afford uncertainty. Such “underinsurance” could cause lower-income consumers to face catastrophic
costs, medical debt, or even bankruptcy. As described in a 2002 Commonwealth Fund report, “Although
stripped-down policies are meant to make insurance more affordable for low-income consumers, they
do so only with enormous risks” (Families USA 2008).

Nationally, this high level of risk has led to low enrollment in basic benefit plans. In most states that
permit the sale of limited-benefit plans, enrollment has fallen far short of expectations. For example,
during the first year of Montana’s mandate-lite health plan, the administrator received 400 requests for
applications, but only 53 individuals enrolled. The program, which provided office-based care but no
inpatient coverage, could serve up to 1,000 Montanans. According to the Director of Health Care Access
for the plan, “After individuals reviewed the plan, they realized that the package didn’t cover enough to
be of value to them.” In 2007, the plan administrator discontinued the program due to low enrollment
(Families USA 2008).

As panel members reviewed proposed value benefit plans, a central concern was about the trade-off
among cost-sharing (particularly deductibles), benefit levels, and premiums. Some of the responses
explicitly stated they designed their plans, including cost sharing, to bring down premiums. Examples of
benefit limits proposed included:
          inpatient charges limited to an annual max of $35,000 or $50,000
          $200,000 annual benefit maximum and a $1,000,000 lifetime max
          exclusion for pregnancy
          $50,000 annual benefit max

Balancing the benefit of “something” (primary and preventive care) vs. the choice to forego care by
many currently uninsured citizens, Panel members were divided as to whether the benefit justified the
cost and the risk to the consumer. The value benefit plans that received the most praise from Panel
members had explicit support of 7 panel members (out of 9 who provided detailed reviews ), while the
VBP that created the greatest amount of concern was only supported by one panel member.

In Section 7 of this report (“Making VBPs Work”), we offer considerations that could potentially address
some of the concern that VBPs will create a problem of underinsurance, underuse of appropriate
services, and undue financial hardship for the very participants they endeavor to help. Section 6
(“Observations”) describes concerns that cannot be explicitly addressed through the VBPs and the


Centennial Care Choices Program – issues in the larger health care system that create barriers to
humane, effective, high quality services for Coloradoans covered by VBPs, public programs, or other
private health insurance.

The large price tag needed to provide subsidies that make Centennial Care Choices Value Benefit Plans
affordable in an individual mandate environment is a barrier to implementing the program.

As explained in more detail in Section 6 (“Making VBPs Work”), the Centennial Care Choices Panel
believes that the program and Value Benefit Plans can only work if there is an individual mandate and a
state subsidy. Because the State is not currently in a position to fund a new subsidy program, it cannot
be implemented as envisioned at this time.

The Request for Information Process and the analysis and evaluation undertaken by staff and the
panel of experts resulted in some next steps to continue the process of moving forward with
meaningful health reform in Colorado.

The process of studying VBPs and the Centennial Care Choices program did result in next steps and areas
where additional study may inform a way forward to providing better access to care for currently
uninsured residents. These are described in more detail in Section 11 (“Next Steps”) and include:
        Debrief with Health Plans/Interested Party
        Increasing our Understanding VBPs
        Explore what a mandate means and how to do it
        Option for State Plan/Role of Cover Colorado
        Reinsurance as part of the solution
        Division/Department involved in other innovative approaches that are also options for
           increasing access to care for the uninsured:
                o Pueblo
                o Colorado Indigent Care Fund
                o Primary Care Fund
                o CCMCN/CCHN Access for All Colorado Plan
                o Provider Fee Assessment
                o Anything from statutory changes?


5. Observations
The panel was not able to ignore the health care system that surrounds the current insurance market in
considering how VBPs could improve access to care for uninsured Coloradoans. Several system changes
were discussed that are important but outside the scope of the panel’s charge to evaluate Value Benefit
           Bill
           When and how the system can actually take the time out to promote health in our population
            by building relationships with the consumer. Relationships are the exception rather than the
            norm. I view health promotion as different from care, but an important component of
           Capacity/access, particularly for primary care

6. Making Value Benefit Plan’s Work

Policy Requirements: Subsidies and Individual Mandate

Most respondents (in addition to the Panel) believe that the Value Benefit Plans would work best in the
context of subsidies and an individual mandate. Subsidies would use state funding to reduce the cost of
the Value Benefit Plan premium to the consumer. Although respondents did not agree on the ideal level
of premium subsidies, most agreed that to avoid or mitigate adverse selection, Centennial Cares
products must be price-competitive with products in the individual market.

The Centennial Care Choices Panel and staff developed RFI questions assuming that state funds would
subsidize premiums for Value Benefit Plans to make them affordable for low income individuals and
families. But the design of the resulting plans and suggestions from respondents led the reviewers to
question whether subsidies have to provide support for premiums only; perhaps there is a way to
subsidize the cost sharing provisions (deductibles, copayments, coinsurance) of VBPs, to truly make
accessing health care affordable.

A second policy issue related to subsidies is whether use of subsidy dollars should be restricted to the
VBP market vs. products available in the broader individual market. Respondents and reviewers agree
that this requirement would also be important in reducing adverse selection in VBPs relative to the
larger individual insurance market.

An individual mandate requires that individuals have health insurance, either through an employer, an
individual plan, or a public insurance program (such as Medicaid). In the absence of an individual
mandate, many question the viability of a guaranteed issue/community rated product that exists


“alongside” underwritten products in the individual market. Most respondents believe that such a
program would result in moderate to significant adverse selection. With a mandate in place, insurers
would likely be less concerned about the occurrence of adverse selection, in which only those who are
sick purchase health coverage, enabling the purchasing pools to work as designed. It is also more
feasible to enforce requirements that insurers guarantee issue and limit rating variation in the individual
market. However, the challenges associated with implementing and enforcing an individual mandate
are substantial.

Additional Policy Concerns: Crowd-Out

Limited-benefit plans that are touted as an option for covering the uninsured do not necessarily reach
their intended audience. Instead, limited-benefit plans can lead individuals or employers who
previously had or offered comprehensive health insurance to reduce the breadth of their benefits,
because of the lower cost. This impact to existing individual, small group, and even large group markets
is commonly called “crowd out.” Crowd out can destabilize existing markets as lower income individuals
drop existing coverage to buy subsidized VBPs, as the sickest individuals buy guaranteed issue VBPs, or
individuals with non-creditable coverage are forced to drop coverage under an individual mandate.
Respondents comments about crowd out issues in the RFI focused on establishing specific annual
enrollment periods or criteria for enrollment in VBPs. Several respondents suggested a waiting period
ranging from 60 to 120 days before an individual would be eligible to enroll in a VBP.

Lessons from other states confirm that crowd out can be a real issue when introducing limited benefit
plans. For example, in 2006, only 11 percent of enrollees in Texas’s limited-benefit plan were previously
uninsured. Limited-benefit plans can be much more appealing to young and healthy individuals than
they are to older people or those with health care needs who have greater risk of large out of pocket
expenditures under the plans. In fact, some policy makers have proposed limited-benefit plans
specifically targeted at young adults. These plans may draw low-cost enrollees out of comprehensive
coverage, leaving behind only older and sicker enrollees in plans with comprehensive benefits. With
fewer young and healthy enrollees to spread the financial risk of illness, the price of comprehensive
plans in a state’s insurance market may skyrocket (Families USA 2008).

Lessons from the RFI

In addition to the policy considerations of subsidies and mandates, there are operational considerations
for Value Benefit Plans that could increase their opportunities for success if the State were to pursue
this strategy.

       Requirement for statewide vs. regional plans
        SB 08-217 explicitly states that VBPs will, at a minimum, “Be offered statewide and issued to any
        Colorado resident eligible pursuant to the terms of the approved VBP who agrees to make the
        premium payments required for that person.” In developing the RFI, Panel members and staff


        assumed that the requirement for statewide operation of VBPs was to assure that plans could
        not participate in “cherry picking,” of offering coverage only to the most attractive (low cost)
        clients in the areas of the state that are the least costly within which to operate. Therefore, the
        RFI required each respondent to describe in which regions of the State they could you offer their
        proposed VBP, and if necessary, describe how they would partner with another entity to create
        a statewide program.

        However, this requirement does create a hardship for regional plans that provide appropriate
        health care coverage in specific areas of the state. If VBPs were to be implemented, the same
        protection against cherry picking could be addressed by requiring plans to offer their VBP
        anywhere they are licensed to provide any health insurance products, instead of requiring each
        VBP to itself be a statewide plan.

       Decision on health mart, brokers, and payment of commissions
         Based on the language in SB 08-217, the RFI instructed respondents to assume that the
         Legislature could establish “health marts” through which an individual may select a VBP that
         best meets his or her needs. More details around this process of marketing to and enrolling
         clients into VBPs will need to be specified before an RFP could be let, as differences in
         understanding led to differences in pricing (i.e. some health plans included broker commission
         in their cost for operating a VBP while some did not) the plans. An additional question posed
         was whether VBPs should be offered to small groups that do not currently offer health
         coverage, through the Health Mart or a similar mechanism.

       80% actuarial equivalence with state employees PPO benchmark
        Because SB 08-217 required development of VBPs with a benchmark standard that was of
        approximately 80% of the actuarial value of a state employees’ PPO plan, benefits were
        automatically starting from a place that is inferior to typical commercial products. While this
        was consistent with the concept of minimum or value benefit plans…

In addition to structural changes to the Centennial Care Choices Program which could be addressed
through defining Value Benefit Plans, respondents offered advice on statutory changes that would make
the VBPs easier to operate. In any future RFP for Value Benefit Plans, the following changes, which were
each suggested by more than one respondent, should be considered:

           Integrate/coordinate eligibility determination with CoverColorado and other public
            programs such as CHP+ and Medicaid

            One respondent suggested that the exhaustion of VBP benefits be a qualifying event for
            CoverColorado enrollment. Another respondent suggested that the State build on programs
            already in place (Medicaid) and utilize CoverColorado to offer an array of VBP products,
            while at the same time improving CoverColorado’s care management. The ability of the


            state to accept the risk for VBP clients through different cost sharing, risk pooling, or
            reinsurance mechanisms should be studied further.

           Specify same rating standards and structure for individual and small group markets as
            what is required for VBPs

            Extending the requirement that health plans only use age and geography only to determine
            rates would help minimize adverse selection.

           Exempt VBPs from premium taxes

Respondents also suggested detailed statutory changes regarding organizations that could offer VBPs,
limits on the number of VBPs offered (to maintain economies of scale) and provider contracting
arrangements that would be beneficial to VBPs.

7. Detailed Results from the Request for Information: VBP Benefits

As described in Section 5, the following companies participated in a response to the Request for
             Celtic Insurance Company (subsidiary of Centene Corporation)
             Colorado Access
             Colorado Choice Health Plans (dba San Luis Valley)
             Cover Colorado
             Delta Dental
             Kaiser Permanente
             Pinnacol Assurance
             Rocky Mountain Health Plans
             United Health Group

Anthem BCBS also submitted a response which was not considered in the analysis and evaluation
because it did not comply with the requirement of SB 217 to limit the characteristics used in
determining premium rates exclusively to the age of individuals to be covered under the VBP and the
geographic location of the policyholder. Rates for Anthem’s SmartSense 1500 VBP were determined by
age, geographic location, and initial health status.

Copies of each response are included in Appendix2 (?) Key characteristics of the Value Benefit Plans are
summarized in three tables to follow, with narrative descriptions of broad themes.


Panel members were asked to submit worksheets describing their reactions to each Value Benefit Plan
proposal including a recommendation on whether they would support offering the plan to uninsured
Coloradoans. Ten panelists provided written feedback on some or all plans (members abstained from
commenting on health plans with which they had a relationship):

Value Benefit Plan   “Yes” votes   “Maybe” votes      “No” votes                Comments
Celtic               4             3                  3               Medicaid and SCHIP experience
                                                                       in other states
                                                                      Maternity benefits excluded
                                                                      Broad PPO network – not cost-
Colorado Access      7             3                                  Safety net provider with
                                                                       experience in Medicaid and
                                                                      Strong systems for managing
                                                                       uninsured/Medicaid enrollees
Colorado Choice      1             3                  5               Regional plan
                                                                      Consumer education focuses on
                                                                       web access
Kaiser Permanente    3             3                  2               Proven model
                                                                      Good use of HIT
                                                                      Don’t have safety net
                                                                      Recognizes association
                                                                       between oral health and overall
Pinnacol Assurance   3             2                  4               No safety net relationships
                                                                      Innovative
                                                                      Discusses 24-hour coverage
                                                                      Interesting partnership with
Rocky Mountain       7             1                  1               Extremely successful in
Health Plans                                                           managing Medicaid
                                                                      Focus on prevention and
                                                                      Good use of HIT
United Health Care   2             2                  6               Good national systems
                                                                      Focused on underwriting


The Panel specifically noted that the two Value Benefit Plans with the greatest level of support (“yes”
votes) are non-profit, Colorado-based companies (highlighted above). Plans that had the least support
were most often criticized for higher costs, lack of knowledge of the population, or perceived “cherry

The Request for Information was designed to gather information on specific plan requirements included
in SB 08-217. Highlights from this information are described below.

Summary Table: Benefits

        Primary care and preventive benefits
        As described in Section 5 and detailed above, the Value Benefit Plans offer low cost access to
        primary care and preventive services. Five carriers offered zero copays on prevention (one
        offered zero dollars for children’s services and low costs for adults). None of the preventive
        services were subject to deductibles.

        Wellness benefits and incentive
        The majority of Value Benefit Plans would encourage members to take Health Risk Assessments
        (HRAs) and offer coaching to members. Incentives to participate in HRAs and health education
        included reward points that could be redeemed for prizes, premium reductions, cash, gifts,
        drawings, and reduced fees and /or premiums for completing HRAs or participating in

        Provider Networks
        Each respondent promised a statewide provider network to offer the proposed VBP in all areas
        of the state, though in reality, several plans currently only serve regions of the state. Only one
        plan discussed strong network adequacy standards.

        The RFI specifically asked plans to discuss inclusion of safety net providers in their networks.
        Some plans have experience with Colorado’s safety net through Medicaid or the Child Helath
        Plan, other companies described experience with safety net and public programs in other
        states. Only one plan had neither (?).

        Reimbursement levels depend on current provider arrangements and are based on everything
        from Medicaid to Medicare and commercial contracts.

      Pay for Performance
      According to respondents, pay for performance reimbursement is not currently in wide use in
      Colorado. Several responses mentioned pilot programs and a willingness to develop programs
      in future.

        Optional coverage choices
        Respondents offered a variety of optional or “buy up” coverage including: dental, prescription
        coverage, short term disability, and accidental death and dismemberment insurance. Several
        carriers also offered plans with lower cost sharing for a higher premium.

        Health Outcomes
        Plans did not offer specific goals for health outcomes for the most part, instead providing
        general discussion of performance measurement and quality improvement processes including

        HIT offerings
        Respondents discussed collaborative health information networks (CORHIO, Quality Health
        Netowrk), personal health records and e-prescribing most often under Health Information
        Technology (HIT) initiatives. Some are also working on web-based practices for the future, such
        as information exchange, web consultations and the Colorado Telehealth initiative.

        Consumer Education
        Responses mentioned fairly typical member handbook and web-based educational
        opportunities without much discussion of the particular needs of the currently uninsured (low
        income, minority) populations.

Cost Summary Table

As described in Section 5, while RFI respondents endeavored to create plans with low premiums, the
result, in many cases, was significant costs sharing requirements to the enrollee. As described above,
deductibles ranged from $0 to $6,000, depending largely on benefit maximums (that is, lower
deductibles were seen in plans were benefits had caps on hospital, prescription drugs, or overall health
benefits). Copayments were generally low for prevention and primary care services, but hospitalization
would range in cost from 20 to 30%, often after meeting the deductible.

8. Detailed Results from the Request for Information: Actuarial Analysis (benchmark, cost, savings)

           Number of plans that met 80% benchmark

            Upon initial analysis, our actuarial consultant was able to replicate the computations that
            proved that five out of eight VPBs fell into the range (75 to 85%) of actuarially equivalence
            set forth by the RFI. The remaining plans were only slightly above the upper limit, and were
            deemed to have met the intent of the RFI.


          Due to time constraints and the realization that a formal RFP process was not likely in the
          immediate future, staff and consultants did not follow up with plans to clarify their

         VBP Pricing

          Pricing Summary Table

          The RFI permitted respondents to make different assumptions about key program elements
          that affect pricing. This decision was based on both a lack of precision in the authorizing
          legislation on several features of the Centennial Care Choices Plan as well as a desire to
          encourage creative responses reflecting industry knowledge and best practices. As a result,
          many of the respondents’ specific program and policy assumptions – especially subsidy
          levels and the effect of an individual mandate -- directly affect their enrollment projections
          and pricing assumptions, making apples-to-apples comparisons difficult. Proposed provider
          reimbursement also varies widely and affects final pricing. Readers of the RFI responses are
          cautioned to note scenario-specific details. As a result, benefits and premium pricing across
          responses often cannot be directly compared.

          At a high level, premiums for value benefit plans depend on which of the uninsured decide
          to enroll. There are generally three categories of uninsured:

              1. Those who cannot afford coverage,

              2. Those who are unable to obtain coverage due to health conditions,

              3. Those who elect to decline coverage because they are generally healthy.

          In general, the respondents agreed that the first and third groups are less expensive to
          cover than the second group (e.g., those unable to obtain coverage due to health
          conditions). Respondents’ final premium estimates reflect, in part, their predictions about
          how many people with ongoing health conditions (group 2) decide to enroll, as compared to
          the less expensive persons in group 1 and group 3. The tendency for more expensive
          individuals to enroll in coverage is known as “adverse selection.”

          Most of the responses assumed that group 2 is least sensitive to premium price increases.
          Even if premiums are on the high side of affordable, people with on-going health concerns
          remain financially motivated to enroll. Individuals who face higher prices in the traditional
          individual market are also more likely to enroll, such as women and people who live in high-
          cost counties. Gender and regional differences in premium pricing can be significant in the
          individual market, as documented in the responses.


          By contrast, healthy young men and those facing affordability issues are most likely to enroll
          when premiums are very low. Premium subsidies can play an important role in lowering the
          out-of-pocket portion of the premium, thereby offsetting the tendency toward adverse
          selection that many respondents view as inherent in the Centennial Cares design.

          Most respondents appear to believe that subsidized premiums for Centennial Cares
          products needs to be combined with an individual mandate in order to achieve significant
          enrollment of healthy, low-cost individuals.

         Potential costs and savings from Centennial Choices

          Two areas are often cited when describing savings that can be achieved by providing
          universal health care coverage: reduction in cost shifting, and savings gained from providing
          preventive care.

          Cost shifting occurs when someone with no insurance and a low income receives care for
          which they cannot pay. So how much uncompensated care is received by the uninsured?
          One study put the number at about $35 billion a year in 2001, or only 2.8 percent of total
          health care expenditures for that year. One reason uncompensated care is such a small
          fraction of health care spending is that uninsured people simply get less health care than
          others (CATO, September 2007). Assuming this 2.8% number is correct, the “shift” occurs
          when health care providers add on to the bill of paying customers (insured or self pay) to
          make up for the unpaid bills of the uninsured. If everyone were insured, the theory goes,
          then the prices that we are all charged can go down. But quantifying this number is

          Savings from providing appropriate preventive care may seem more tangible, but they can
          also take a long time to materialize. Louise Russell, Ph.D., a professor of health economics
          at Rutgers University in New Brunswick, N.J., said most prevention efforts do not result in
          cost savings. Her viewpoint was countered by Ron Goetzel, Ph.D., director of the Institute
          for Health and Productivity Studies at Emory University in Atlanta, who argued that
          prevention "offers a very good return on investment." Russell and Goetzel published their
          respective views in the January/February issue of Health Affairs.

          According to Russell, prevention efforts can result in savings to the health care system, but
          in most cases, the savings are "outweighed by the cost of the prevention/intervention
          itself." “There are many, many medical interventions that we do routinely that cost
          hundreds of thousands of dollars for a life that is saved, some of them millions of dollars for


          a life that is saved." Russell said there have been thousands of carefully designed cost-
          analysis studies conducted in the area of prevention during the past 40 years that
          consistently point to one conclusion: The vast majority of preventive interventions add more
          to medical spending than they save. For example, said Russell, the Tufts Medical Center
          Registry reviewed the cost-effectiveness of hundreds of treatments and prevention efforts
          between 2000 and 2005 and found that more than 80 percent of the prevention efforts
          increased medical costs rather than reduced them.

          "This conclusion applies to a wide range of interventions and to the major preventive
          interventions that we all know about -- drugs to reduce high blood pressure, drugs to reduce
          high cholesterol, cancer screening tests and lifestyle changes to prevent or delay the onset
          of diabetes," Russell said. Prevention efforts are aimed at the probability of a condition --
          something that might happen, not something that has happened, she said. Although Russell
          said she is convinced that prevention does not save costs in most cases, she nevertheless
          described prevention as a worthwhile component of good medical care, noting that "for
          chronic conditions, as well as other health problems, our goal should be to use prevention
          as effectively as possible."

          Goetzel responded to Russell's comments, saying that prevention and health promotion can
          provide high value by improving lives at a relatively low cost when compared with the
          expense of treatments. The discussion should focus on ways to achieve enhanced health
          care for the population and to allocate resources most effectively to "get the biggest bang
          for the buck," said Goetzel. He acknowledged that certain clinical preventive services do not
          save money. Prevention efforts encompass a broad range of diverse and far-reaching
          initiatives, including childhood immunizations, raising taxes on cigarettes, cancer screenings
          and eliminating the sale of sugary beverages in schools.

          "Health care spending in the United States exceeds $2 trillion a year, with three-fourths of
          that spending directed at treating chronic diseases," said Goetzel. "Nearly two-thirds of the
          growth in spending is a result of Americans' worsening health habits." The nation's health
          care delivery system "favors paying for the treatment of chronic diseases rather than
          preventing them in the first place," he said. "We need to improve the health of Americans
          and, thereby, reduce the social and financial burdens imposed by preventable diseases,"


           Goetzel said (Health Experts Clash Over 'Cost Savings' From Prevention Measures
           By James Arvantes Washington 1/14/2009

           Although these cost savings opportunities are well documented in the health policy
           literature, in the absence of detailed plans for subsidy and mandate provisions, the RFI
           process did not yield detailed enrollment information (see Section 9 for summary data). A
           cost savings projection for covering more Coloradoans through Value Benefit Plans is not
           possible at this time.

9. Detailed Results from the Request For Information: Target Markets

       Centennial Care Choices staff and consultants provided estimates of the number of uninsured in
       Colorado by federal poverty levels, by state-defined age increments, and by 9 regions currently
       used in the Colorado small group market. Many of the responses did not project enrollment for
       all 9 regions (statewide). However, most respondents appear to have considered the entire
       uninsured population within each region targeted by their proposed VBP product. However,
       several respondents noted that “care would most likely be unaffordable for those over 300%
       FPL without a subsidy.” Perhaps for this reason, at least one respondent appears to restrict its
       VBP enrollment assumptions to only the subsidy-eligible population (e.g., 100-300% FPL).

       While not able to explicitly exclude enrollees with chronic illness, some plans did comment...
       Also, two (?Celtic) plans excluded maternity coverage in at least one version of their Value
       Benefit Plans.

       Potential enrollment coverage increase – Bill?

10. Need for further study/Next Steps

   In spite of mixed feelings about the specific plans proposed during the RFI process, the Centennial
   Care Choices Panel found value in the process of learning about Value Benefit Plans and other
   potential fixes for Colorado’s health care system, and keeping the discussion and understanding of
   reform options moving forward. The following recommendations provide a path for moving ahead
   in the absence of state funding for subsidies to compliment an individual mandate in Colorado in the
   near future.


         Debrief with Health Plans/Interested Parties

      The Department and Division are interested in understanding more about the health insurance
      industry’s reaction to the RFI process and their proposed VBPs, including:
          1. How the proposed VBPs differ from limited benefit plans already on the market?
          2. What market research/consumer information did they use to develop benefits and
              other programs?
          3. What additional data is needed from the State to do a better job in developing Value
              Benefit Plans?

         Increase our Understanding VBPs

      While Value Benefit Plans are obviously of interest in providing access to critical health care
      services for currently uninsured Coloradoans, there is much more to be learned about this
      concept and its implementation. Several states have implemented versions of Value Benefit
      Plans with little background research and have seen limited enrollment as a result. The high
      cost-sharing and minimal protection in limited-benefit plans make it questionable as to whether
      they are even worth purchasing for many consumers. Uninsured individuals may feel that they
      are better off paying no premiums at all and instead rely on safety-net care. In response to the
      barebones “Cover Florida” program, one 42-year-old mother replied, “One hundred fifty dollars
      a month for a policy that doesn’t cover anything? I wouldn’t pay. If you want to see a doctor,
      you can go to a walk-in clinic and pay $95 when you are sick (Families USA 2008).

      To ensure a successful Centennial Care Choices program if and when funding becomes available,
      the state should continue its exploration of what would make a limited benefit plan attractive to
      the target market, and what people who currently do not have insurance want in terms of
      access to health care. This would necessarily include exploration of how the intended clients
      prioritize various benefit options, but also could focus on how they currently access care (safety
      net providers) and identification of their greatest needs.

      The CHAT process, which is described in the December 15 report, on page x), provides one
      option for prioritizing benefits. Other processes would need to be planned to take into account
      the opinions of potential purchasers of VBPs, with particular emphasis on those who are low
      income, minority, non-English speaking, and have chronic health care needs.

         Explore what a mandate means and how to implement it


       Questions about implementing individual mandates include defining minimum creditable
       coverage and an enforcement mechanism. According to SB 08-217, Value Benefit Plans would
       become minimum creditable coverage, but more analysis of what this means in terms of existing
       health insurance products in Colorado’s market should be conducted. Enforcement mechanisms
       that include financial penalties to low income citizens are not supported universally, so options
       should be examined here as well. In Massachusetts, the first year’s penalty for noncompliance
       with the individual mandate was the he loss of the state income tax exemption (about $200).
       The penalty in subsequent years will be up to 50% of the premium an individual would
       otherwise have had to pay (RAND: Health COMPARE: Policy Options: Overview of Individual
       Mandate. Accessed on 1/27/2009.

          Option for State Plan/Role of Cover Colorado

           SB 08-217 specifically includes the State as an eligible entity to develop a Value Benefit Plan:


           A working group or task force within the Department of Health Care Policy and Financing
           could develop a proposal…

          Reinsurance as part of the solution

           A strategy for improving the affordability of coverage is to provide some form of reinsurance
           for high cost claims. These high cost claims are incurred by a small share of individuals but
           represent a large share of total health costs. By limiting insurance companies’ exposure to
           very high health costs, reinsurance programs enable insurers to lower the premiums they
           charge to employers and individuals. This type of program is a form of subsidy to the insurer
           that lowers the premium cost for all purchasers. Currently, a handful of states, including
           New York and Arizona, operate reinsurance programs (KFF Approaches).

In addition to these areas of further study, the Division/Department are involved in other innovative
programs and approaches that are not necessarily insurance approaches, but could provide health care


for the uninsured. These options should be watched for potential applicability to the problem of
Colorado’s uninsured residents.
          Pueblo

           Colorado Indigent Care Fund

            The CICP distributes federal and State funds to partially compensate qualified health care
            providers for uncompensated costs associated with services rendered to the indigent
            population. Qualified health care providers who receive this funding deliver discounted
            health care services to Colorado residents, migrant workers and legal immigrants with
            limited financial resources who are uninsured or underinsured and not eligible for benefits
            under the Medicaid Program or the Children's Basic Health Plan.

            Local hospitals and clinics enroll families into the CICP. To qualify, applicants must have
            income and resources combined at or below 250% of the Federal Poverty Level (FPL), and
            cannot be eligible for Medicaid or CHP+. There are no age limitations for CICP eligibility.

            Under CICP, clients never have to pay more than 10% of their income in a 12-month
            calendar period for medical care from a participating health care provider.

           Primary Care Fund

            In accordance with Section 21 of Article X (Tobacco Taxes for Health Related Purposes) of
            the State Constitution, an increase in Colorado's tax on cigarettes and tobacco products
            became effective January 1, 2005, and created a cash fund that was designated for health
            related purposes. House Bill 05-1262 divided the tobacco tax cash fund into separate
            funds. The law assigns 19% of the tax collections to establish the Primary Care Fund and it
            specifies how the funds are to be allocated.

             The Primary Care Fund provides an allocation of moneys to health care providers that
            qualify under specific criteria and that make basic health care services available in an
            outpatient setting to residents of Colorado who are considered medically indigent. Moneys
            are allocated based on the number of medically indigent patients served by one health care
            provider in an amount proportionate to the total number of medically indigent patients
            served by all health care providers who qualify for moneys from this fund.

           CCMCN/CCHN Access for All Colorado Plan

            A new plan developed by the Colorado Community Health Network (CCHN) and Colorado’s
            Community Health Centers shows how increasing funding over the next 20 years will allow
            Health Centers to serve as the health care home to one million Coloradans, approximately
            half of them uninsured. In the first five years, Health Centers would expand capacity to care
            for 200,000 low-income uninsured and another 199,000 Coloradans in need of a health care
            home. The plan will require:

                      • $206 million in capital investments
                      • 322 new physicians, nurse practitioners and physician assistants
                      • $236 million in new operational dollars to care for the low-income uninsured
                      patients. This is less than $500 per patient per year for medical care.

          The proposed expansion will require additional support from local communities and
          businesses, patients, foundations, and the state and federal governments.

         Provider Fee Assessment
          One commonly used source of revenue to fund health initiatives in other states is provider
          fees. Provider fees are a legal funding source eligible for federal matching funds when used
          to reimburse Medicaid covered services. More than 40 states have imposed some provider
          fee, including more than 15 states that have imposed hospital provider fees. Colorado
          approved a nursing home provider fee in the 2008 session (HB 08-1114).

          Last spring, the Governor’s Office and the Department of Health Care Policy and Financing
          entered into collaborative discussions with the Colorado Hospital Association about the
          establishment of a hospital provider fee in Colorado. We have been working together for
          seven months to develop a proposal.

          As currently modeled, we are considering a hospital fee based on patient days that will
          generate new revenue to:

          o   Increase hospital reimbursement rates under Medicaid and CICP, which will help reduce
              uncompensated care and cost shifting; and
          o   Cover the uninsured by increasing eligibility for Medicaid and CHP+.

          The hospital provider fee will also create an opportunity for the state to reform and
          modernize the way payment rates are set for various hospital services. This will allow for a
          more rational and transparent hospital payment structure.

         Anything from statutory changes?


11. Conclusion
        Centennial Care Choices Panel, Department, and DOI consider this a successful RFI with
           cooperation from private sector and a number of interesting responses
        Some plans attractive (especially primary/preventive) and premium is affordable if
           Legislature had political will to impose individual mandate and guaranteed issue
        Some concerns about cost sharing (deductible, copay, coinsurance) affordability for
           currently uninsured
        No money for state to spend on subsidies now – and Centennial Care Choices won’t work
           without them
        Potential federal funding as part of stimulus package (Medicaid expansion, COBRA subsidy)
        Important to keep moving forward; the demand is higher than ever
        Look at additional information gathering and approaches so that the State can close in on


12. Appendices
        December 15 Report
        RFI Responses
        Response summary grid/side by side (Ed)
        Actuarial Report (Julie)
          Demographic/Uninsured Data Report (Tracey)


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