Colorado’s Healthcare Solution

Colorado State Government Offers Cash Incentives for Employees Who Choose Lower-Cost Health Care Providers

The state government in Colorado is working to incentivize state employees to choose lower-cost and higher-quality healthcare providers to disrupt the dysfunctional market for healthcare. The state is one of 12 employers that have joined the Colorado Purchasing Alliance, which negotiates lower prices for healthcare services. State employees who choose providers ranked in the top 25% for quality and cost using the Healthcare Bluebook, an online tool that ranks health providers by quality and cost, receive a check in the mail for a portion of the savings. The checks vary from less than $50 for a mammogram to thousands of dollars for surgery, offsetting the employee’s copayments, coinsurance, or deductible.

The initiative is only available to state employees on the self-funded health plan, which is administered through Cigna, not the Kaiser Permanente option. The Healthcare Bluebook estimates that employers save an average of $1,500 every time an enrolled member uses the online tool to choose a provider, although it is too early to tell how much the state will save.

Larimer County in northern Colorado has been using Healthcare Bluebook since 2018 as part of its incentive program to counteract the high prices it was paying for employees’ care under its self-funded plan. The county paid out an average of $15,000 in rewards per year over the first four years. The county calculated that for every $1 it spends to offer Healthcare Bluebook to its employees, it saves $3.50.

Similar approaches have been used with varying degrees of success across the country. Self-Insured Schools of California, a purchasing alliance that represents 450 school districts in California, implemented a similar system years ago. The alliance compared the prices it paid for five common procedures at hospitals versus free-standing surgery centers and found that surgery centers were generally much cheaper, often with better care ratings. In the first year, the new approach had shifted 54% of procedures from high-cost hospitals to lower-cost surgery centers, saving the school districts $3.1 million in healthcare costs.

The goal is to force health systems in the state to cut their rates by encouraging employees and employers to make better choices, ultimately cutting healthcare spending without harming employees. The initiative is one of many efforts across the US to reduce the cost of healthcare and provide better quality care for patients.