Colorado’s Plan To Cut Ski-Town Health Premiums Gets Approval
The U.S. Dept. of Health and Human Services has approved Colorado's plan to consolidate several rating areas to reduce health insurance premiums in rural and mountain communities.
Local officials in mountain resort areas west of Denver had been crying ‘foul’ over sky-high premiums, which were among the highest in the nation.
In response, Colorado’s insurance commissioner Marguerite Salazar announced a plan to redraw the boundaries of the state’s 11 geographic rating areas to spread the costs out into a much larger pool.
Under the new health care law, the state was divided into rating areas based on health care costs, which then determined insurance premiums on the state’s insurance exchange.
Those premiums turned out to be markedly higher than in larger metropolitan areas.
To address concerns, Gov. John Hickenlooper asked Commissioner Salazar to form a group to study the issue. One of the outcomes was an evaluation [.pdf] of the geographic rating areas, and the wide variability in costs across different counties.
High rates in resort areas could partly be chalked up to the higher cost of living -- but that wasn’t the only factor. Access and availability also played a role, the study found, especially in rural areas like the Eastern Plains.
"In larger, more metropolitan areas, you have more doctors, more physician groups, more hospitals," Plymell said.
Because of that, insurance companies have more leverage when it comes to negotiating better prices for health services. On the other hand, in smaller or more rural communities, one hospital and a small number of doctors or specialists could be the only game in town, giving them more leverage to negotiate higher fees.
Under the new plan, Plymell said the 11 geographic rating areas will be reduced to nine. Two areas on the Western Slope made up of 21 counties will be combined into one new rating area. Also combined would be two Eastern plains areas consisting of 26 counties.
"These larger rating areas spread the risk and costs of health care over a larger population," Commissioner of Insurance Marguerite Salazar said in a press release. "This is the most equitable way of working towards stable premiums in all regions in the state. The Division thanks the HHS for their prompt attention to this request to help the people of Colorado."