Healthcare and medical business concept

The bill to refinance the state's reinsurance program and extend it for an additional four years won preliminary approval from the House Friday evening, after a marathon negotiation session between the sponsors and health insurance carriers.

Senate Bill 215 would cut the fees paid into the reinsurance program by hospitals and levy a new fee for health insurance carriers to make up the difference and then some.

Reinsurance is a type of insurance that pays for health insurance plans' most costly claims. The General Assembly adopted a bill last year to set up the two-year program, which obtained federal approval. 

The program applies only to the individual market in Colorado, which is about 7% of those insured. 

Last year's law resulted in lower health insurance premiums, as much as 30% in some parts of rural Colorado, and 20% less statewide.

Under last year's law, hospitals were slated to pay a $40 million fee beginning July 1.

Under SB215, the hospitals' fee was cut in half and the first payment isn't due until Jan. 1, 2022.

The bill also addresses several glitches in the insurance market, according to co-sponsor Rep. Chris Kennedy, a Lakewood Democrat. One is that employees who get their insurance from employers aren't necessarily able to include families in the employers' plans. SB215 would cover some of the costs for family premiums in the individual market. 

Another glitch has to do with the federal subsidy that helps cover some of the premiums. Those who were receiving the subsidy found that with lower premiums, their subsidies also dropped, sometimes more than the cost of the premius, leaving them with a higher net cost. 

Finally, the bill does something no insurance plan has ever done: cover undocumented residents, although they would not be eligible for the federal subsidy.

The bill sets up an enterprise, to be managed by the commissioner of insurance, which pays for the program with a fee levied on insurance plans. 

Bill sponsor Rep. CHris Kennedy explained Friday that the fee would replace a federal health insurance tax that was set up in 2010 to pay for the Affordable Care Act. The HIT is repealed as of Jan. 1, 2021. 

For nonprofit carriers, as introduced, SB215 levied a fee of 1% of premiums and 2% of premiums on for-profit carriers, who cried foul and claimed the higher fee would put them at a competitive disadvantage. 

That's what led to the marathon negotiation session that took place Thursday and into Friday.

The House amended SB215 to hike the fee for the nonprofits to 1.15% and lowered the for-profit fee to 2.15%. 

Kennedy explained that the fee is now higher for the nonprofits than the federal HIT was. Those nonprofits are union shops Kaiser and Elevate, a carrier operated by Denver Health. 

Health insurance carriers, however, have pointed out that the fee, which would bring in $95 million in the initial years and up to $110 million in out years, will generate far more revenue than the program requires. That's led to a claim that the fee would instead be a tax and violate the Taxpayer's Bill of Rights. 

Kennedy and co-sponsor Rep. Julie McCluskie, a Dillon Democrat, point to the "business services" in the bill that would be provided to the health carriers as justification for the higher fee. 

They also amended the bill to limit the authority of the commissioner of insurance, responding to concerns that the commissioner could put in place a public option program on his own. 

SB 215 will require a final vote on Saturday and then go back to the Senate for concurrence on the amendments. 

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