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A helicopter flies over the new Children's Hospital in Colorado Springs in May.

The Colorado Hospital Association has withdrawn a lawsuit filed against the Colorado Division of Insurance over rules tied to the state's reinsurance program.

The lawsuit was filed on Jan. 14 and challenged a Division of Insurance decision to charge Colorado hospitals $40 million in fees for the reinsurance program earlier than was required by the law passed in 2019, House Bill 1168.

On Dec. 25, the Division issued an emergency rulemaking notice that mandated the hospitals pay the fee no later than June 30, 2020, in part to avoid triggering a higher TABOR refund. But the law says those fees aren't due until July 1. 

The Division, in the emergency rulemaking, threatened hospitals that didn't pay by June 30 with revocation of license, something the hospital association said the Division didn't have the authority to do.

The hospital association also pointed out by issuing the rules on Christmas Day, that no one at the Division would be available for questions about those rules. And the rulemaking announcement violated the state's Administrative Procedures Act, the lawsuit claimed. That governs how state agencies conduct rulemaking processes.

The day after the lawsuit was filed, the Division issued a notice for a new rulemaking hearing, scheduled for Feb. 18. However, the proposed rule still intends to allow the Division to collect the $40 million fee by June 30. 

But the threat of yanking licenses is now gone, replaced by language that allows the Commissioner of Insurance to enforce payment within his existing authority.

In a statement Wednesday, the hospital association pointed out that a legislative solution is also being contemplated. No bill has been introduced on that yet. 

But the hospital also maintains its position that payments are not due until fiscal year 2020-21. Christ Tholen, CHA president, said “we support a forthcoming legislative solution that is a win-win-win for the reinsurance program, for hospitals, and for the state budget. That said, if the administration proceeds with the attempt to collect hospital payments early — especially in the face of a workable solution — we’ll be back in court if necessary."

The reinsurance program contained in HB 19-1168 is designed to lower premiums for individuals buying insurance on the state health care exchange. The program resulted in a 15.5% to 34% drop in insurance premiums, with individuals who buy their insurance in rural communities the biggest beneficiaries. 

The reinsurance program will only operate for two years; after that, lawmakers and the governor are pushing for the public option proposal that private insurers would be required to offer in the individual market. However, lawmakers are now talking about extending reinsurance for another year.

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