DENVER — What the heck is reinsurance?
It's one of Colorado Gov. Jared Polis' (D) promises that he made during his state of the state address in January.
"A reinsurance program for the highest cost cases is a proven solution to reduce healthcare costs. It's worked in other states, it's one we should embrace in Colorado to save small businesses and individuals money," Polis said in January.
Reinsurance is essentially insurance for insurance companies. It exists in eight other states: Alaska, Hawaii, Maryland, Minnesota, New Jersey, Oregon, Wisconsin and Maine.
"I don't think I met a single person anywhere in the state, in my campaign for Governor, that said I'm paying too little on health care," Polis said at a news conference on Wednesday just before a reinsurance bill was to be debated at the State Capitol. "Reinsurance has been proven to bring down rates."
The committee hearing where the bill will be debated, and potentially amended, will last into Wednesday night. You can listen to that hearing here.
So how does providing insurance for insurance companies save you money on your health care?
A group of bipartisan lawmakers pushing the bill believes that reinsurance will get insurance companies to offer lower premiums to consumers, knowing that they will still get paid for high claims through a new funding mechanism that would protect insurance companies.
Democratic State Rep. Julie McCluskie (D-Dillon), Rep. Janice Rich (R-Grand Junction), Sen. Kerry Donovan (D-Vail) and Sen. Bob Rankin (R-Carbondale) are the group of Western Slope lawmakers sponsoring the bill. Medical plans on the Western Slope are among the most expensive in Colorado.
Those lawmakers believe reinsurance could reduce premiums 30 to 35 percent on the Western Slope, 20 to 25 percent in far northern and southern Colorado and the Eastern Plains, and 15 to 20 percent in the metro area and foothills.
"We are bringing down how we are paying for the services that are provided by our providers and by our hospitals," said McCluskie.
This would impact consumers who buy health insurance off the individual market, and not through an employer-provided plan. The individual market makes up about 6 to 8 percent of those insured in Colorado.
Here's how reinsurance in Colorado would work:
Instead of insurance companies and consumers paying a medical provider for coverage of a high claim, a state fund would be created -- with federal dollars -- to help insurance companies pay for those high claims, on the belief that insurance companies would lower the cost of premiums for the consumer. At the same time, the state would limit how much the medical provider would be allowed to be reimbursed for medical services.
"Taking those more expensive medical claims out of the pool, we're able to lower the risk for all of the other lives and lower insurance premiums," said McCluskie.
"Unfortunately, the bill as currently drafted, puts the whole cost of this on hospitals, and we don't think that hospitals are the only ones that should bear the burden of this program," said Kathrine Mulready, Chief Strategy Officer and Senior Vice President of the Colorado Hospital Association. "Payments to hospitals and other health care providers, doctors, nurses, physical therapists and others will be cut, without any of our direct costs also going down."
The bill would limit how much a medical provider could be reimbursed for services provided. The bill, which was still being debated as of 7 p.m. Wednesday night, was going to reimburse medical providers a set amount regardless of what the hospital charges for the service.
"Those cuts will mean reduced access to services, maybe reduced staff or costs shifted to other parts of the health care system," said Mulready.
Where would the money come from to insure the insurance companies?
Currently, depending on your income level, some individual market health insurance consumers received a tax credit to help pay for their premium. The state would request a federal waiver, allowing the money that helps fund those tax credits to be transferred to a state fund that insurance companies could tap into to help cover high-cost claims. The bill sponsors believe this would incentivize insurance companies to reduce premiums for consumers, thus attracting more consumers to sign up for coverage.
This is a complicated topic. Click here to read more about the legislation.
Watch more "Polis' Promises" here: