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Colorado is resurrecting an old progressive health goal with a new twist, creating a public health insurance option that could be a model for other states trying to expand available coverage as they weather the pandemic.

Why is it important: Using the flexibilities provided by the Biden administration on Thursday, the state is trying to prove that the state health plan can attract more consumers and save money while avoiding the political traps associated with single payer systems.

Lead news: Colorado on Thursday became the first state to receive federal waiver create a plan called the “Colorado Option” to be offered on the state’s Affordable Care Act starting in 2023.

  • The plan will compete with private exchange plans with premiums that are 22.3% lower on average.
  • This is projected to save the federal government $214 million in tax credit subsidies next year.
  • Colorado will also expand the government subsidy program to lower costs for people who are not eligible for ACA subsidies.
  • It is estimated that by 2027 when the waiver expires, by 2027 when the waiver expires, about 32,000 residents may be covered.

Big Picture: Washington state is the only state with a public choice, but Nevada, Oregon and Connecticut are weighing whether to follow suit.

“We encourage all states to consider in the future innovative ways to use the Section 1332 exemptions to expand and improve coverage and reduce costs for their residents,” CMS Administrator Chiquita Brooks-Lasur said in a statement.

Yes, but: Washington’s plan, which dates back to 2019, has run into obstacles, including hospitals are unwilling to volunteer due to low payouts and policies that tie reimbursement to Medicare rates.

  • Private insurers also refused when contracting with the state and participating in the plan, in part because the hospitals were careful.
  • Washington officials are trying to fill coverage gaps in some underserved areas and set next year’s rates to ensure every county in the state has a public choice plan.
  • Data from the Washington Health Benefits Exchange show that more Washington residents opted for public option plans called Cascade Care in 2022 than in 2021.
  • In 2021, only 12% of people with exchange plans opted for the Cascade Care plan, but in 2022, nearly a third of exchange plan customers opted for the government-designed plan.

Intrigue: Colorado is trying to avoid some of the biggest problems facing Washington.

  • The biggest difference is that insurers that offer ACA exchange plans in the county will also be required to offer the Colorado option from the start for both individual coverage and small group coverage.

  • “This means that everyone will essentially have a Colorado variant, which will make their presence more meaningful,” Krutika Amin, deputy director of the ACA program at the Kaiser Family Foundation, told Axios.
  • Colorado’s public option plans will also need to meet network adequacy requirements to ensure there are enough providers.

Memory: Center Democrats in Congress public option placement rejected in the Affordable Care Act over ten years ago.

  • The idea was resurfacing even before the pandemic, and Colorado Gov. Jared Polis signed into law last year put into motion his state’s version of the state plan.
  • President Biden advertised public version during his 2020 campaign to secure Obamacare coverage.

What are we watching: The end of the COVID-19 public health emergency could change the outlook for public health insurance plans as thousands of people who remained in Medicaid plans throughout the pandemic may no longer qualify.

  • It remains to be seen if this population will be able to find affordable coverage in government markets.
  • States like Colorado are hoping to close this gap with subsidies for those with certain income levels that enroll in the Colorado option.

bottom line: Other states will closely follow the experiences of Colorado and Washington as the country emerges from a public health crisis and the uninsured population is expected to rise.

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