After years of shrinking options in Colorado’s individual health insurance market, especially in rural parts of the state, choice and competition are making a comeback.
CLAIM: In 2021, 54 out of Colorado’s 64 counties are expected to have two or more insurance companies selling health plans on Connect for Health, the state’s Affordable Care Act exchange. This is a major improvement in the marketplace for consumers compared to previous years.
This is true. In a recent story about anticipated healthcare premiums for 2021, the Denver Post noted:
The number of counties with only one insurer selling on the exchange is expected to drop from 22 to 10…
This constitutes a major reversal of a trend that has been building for years: Political and regulatory battles over the Affordable Care Act have made the individual health insurance market highly volatile, prompting a number of insurers to simply pull out of the market in some areas of the country.
The individual market, which was completely overhauled by the ACA, serves people who do not receive health insurance through their place of employment, or through a government program such as Medicaid or Medicare. In Colorado, this means roughly 7% of the population obtains health coverage through the individual market.
In Colorado, declining choice and competition in the individual market has hit rural communities hardest of all. Starting in 2016, insurers started pulling out of the Connect for Health exchange in areas outside of the I-25 corridor and Mesa County in Western Colorado.
This year, the number of counties with only one insurance company on the exchange peaked at 22. But starting next year, according to the Colorado Division of Insurance, that number is expected to fall to 10.
For scale, that is the best outcome in terms of choice and competition since 2017. Still not good enough, of course, but a huge turnaround nonetheless.
(Note: In 2021, anticipated counties with only one insurance company on the Connect for Health Exchange are: Eagle, Jackson, Logan, Moffat, Phillips, Rio Blanco, Routt, Sedgwick, Washington and Yuma)
State officials have credited a new reinsurance program, which began in Colorado this year, for this increase in choice and competition. As a result, average premium increases in the individual market are expected to be 2.2% next year, compared to a projected 17% increase without the reinsurance program.
Under reinsurance, the state helps insurance companies pay the cost of their most expensive claims in order to help lower premiums for other policyholders in the individual market. While there is reason to believe reinsurance is helping to ease some of the upward pressure on individual market insurance premiums, the full story is more complicated.
As we have noted before, the implementation of the reinsurance program has caused a reduction in federal tax subsidies for many households in the individual insurance market. Reducing these subsidies has actually resulted in a net increase in the cost of health insurance for thousands of low- and middle-income families across the state. Therefore, the major beneficiaries of the reinsurance program have, in fact, been wealthier households with incomes that are too high for them to receive federal subsidies in the first place (i.e. for a family of four, the cutoff is $104,800 per year).
Until state policymakers find a way to fix this problem and prevent low-income and middle-income families from being penalized, the data on average premiums will only tell part of the story. But the anticipated expansion of choice and competition in Colorado’s individual health insurance market, after several years of contraction, is still welcome news and hopefully a sign of even better things to come.