Why Colorado’s state employee health insurance plan just made a pretty significant change

If you are in Colorado and you need treatment for, say, cancer, there are dozens of hospitals and clinics that can provide it for you. But those places are not equal.

Some charge dramatically more than others — sometimes twice as much — for the same service. Some have significantly higher quality ratings, as scored by independent firms.

This variability helps explain a quietly significant change in the health insurance plan covering some state employees that took effect last month — a change that shows how the Polis administration is pushing forward with its health care reform policies in ways that don’t always draw headlines.

For years, Gov. Jared Polis has been touting the potential benefits of a health insurance model  for employers called a purchasing alliance and championing legislation that gives such arrangements a boost. In a purchasing alliance, employers seek to gain greater control over how much they spend on health care for employees by acting as more vigilant consumers.

Under the current, typical system, employers outsource the work of negotiating health care prices to insurance companies. The insurers do all the haggling with hospitals and other providers, then tell employers what it’s going to cost. Under a purchasing alliance, employers band together to do that negotiating themselves, with the goal being to drive bargains that insurance companies may not be motivated to seek.

The model’s best-known example in Colorado is the Peak Health Alliance, which covers people in eight high-country counties. But others have also sprung up, including one called the Colorado Purchasing Alliance.

Now the significant part: As of last month, the state employee health plan has joined up with the Colorado Purchasing Alliance to provide access to lower prices and other health care shopping tools.

“We’re constantly looking for ways to be as efficient as possible with taxpayer dollars and our member, employee dollars,” said Doug Platt, a spokesman for the Colorado Department of Personnel and Administration. “So we’re constantly looking for these innovative programs.”

The move is another example of how employers in Colorado, fed up with the high cost of paying for health care coverage for their employees, are turning to innovative solutions to save money. And, to be sure, this is a baby step into the world of alternative employer-sponsored health insurance models.

Only employees who are enrolled in the state’s Cigna plans have access to the alliance tools. About 19,000 people are covered under the Cigna plans, Platt said; more than 11,000 other state employees and their family members are covered by the state’s Kaiser Permanente options.

Participation in the alliance aspect of the plans is also voluntary. It works like this: When an employee needs to have something done — a colonoscopy, let’s say — they can still go to their regular doctor and get it done at Cigna’s regularly negotiated rate. But, the alliance also gives them access to something called the Healthcare Bluebook, which allows them to compare the prices and quality ratings for a bunch of providers, including providers with whom the alliance has negotiated lower-price contracts.

When employees use the Bluebook to pick a lower-cost provider, the employee could end up getting a check in the mail, essentially a cut of the savings. Platt said the goal is for employees to receive the refunds within 90 days.

The state has high hopes for the experiment. But, because the partnership is still in its infancy, Platt said it’s too early to say how much it will save the state — or employees.

“We hope that as they learn about it and explore it that they will take advantage of another way to obtain quality health care,” he said.

The state’s participation is a big milestone for the Colorado Purchasing Alliance, which began as an outgrowth of the Colorado Business Group on Health. The latter is a collection of employers who put their heads together to try to figure out how to lower health care costs.

The alliance, like the Business Group of Health, is headed by Robert Smith, a longtime health care executive who has spent the last several years using that experience to ponder ways to make the health care marketplace work better. His vision: If you want lower health care prices and better quality, the responsibility falls on the people who pay for it. In Colorado, where roughly half the state is covered by a health care plan tied to a job, that means employers.

“If the marketplace is dysfunctional, you can’t blame the hospitals and you can’t really blame the insurers,” Smith said. “It’s the employers who write the checks.”

Smith said there are 12 employers so far signed up with the Colorado Purchasing Alliance, including a smattering of school districts and local governments. But the state’s participation is huge. The large number of people covered gives the alliance greater leverage in negotiations.

Smith said he is also hoping the state’s willingness to be a part of the alliance sends a message to employers still on the fence.

“It gives other employers courage,” he said. “It’s my intent to make the state of Colorado an exemplar for employer-based purchasing.”

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This content was originally published here.