Money health medical dollars

The Senate Finance Committee on Wednesday approved a rewrite of the state's reinsurance program, over the loud objections of health insurers who said they were denied an opportunity to work with bill sponsors.

Senate Bill 215, which is being pushed by Gov. Jared Polis, would restructure the financing of the reinsurance program. The legislation was introduced around 5 p.m. Tuesday night and rushed into a Senate Finance hearing barely 18 hours later. 

The reinsurance program, set up in 2019 legislation, is support for health insurers to help them cover high-cost claims. The 2019 program, a signature part of Polis' agenda, lowered the cost of health insurance for the 7% of Coloradans who buy their own, known as the individual market. It resulted in premium decreases of as much as 30% in rural Colorado, the state said. 

It was paid for by about $15 million in state dollars and a fee assessed against hospitals for a total of $40 million. Democrats claimed that hospitals, which were reporting high profits, could afford the fee. 

The program was intended to run only two years with a cost of $60 million to the state in 2020-21. With budget cuts looming because of the COVID-19 outbreak, that cost was looked at longingly by budget writers, and a bill to repeal the second year was even drafted. In the end, however, the bill was never submitted by the Joint Budget Committee, possibly because two current JBC members, Sen. Bob Rankin, a Carbondale Republican and Rep. Julie McCluskie, a Dillon Democrat, had sponsored the 2019 legislation.

SB 215 makes substantial changes to the financing of the reinsurance program. The bill creates a fee to fund a new enterprise that would encourage Coloradans in the individual market to keep their coverage. The fee, paid for by insurers, would also fund business services for the insurers that would be provided by and administered by the Division of Insurance.  

The program would charge nonprofit health insurers 1% of their premiums; for-profit insurers would pay 2.5% of premiums collected, both beginning on Jan. 1, 2021.  

Opponents claimed Wednesday that the bill puts the division into the position of running a business. 

In addition, opponents said, those fees would raise $90 million or more, not including the $20 million paid by hospitals, which is far more than the reinsurance program would cost. As a result, it would raise issues around TABOR.

Why TABOR? The Colorado Supreme Court ruled in 2008 in the case Barber v. Ritter that discussed the difference between a tax and a fee. In the majority opinion, Justice Michael Bender wrote that "we hold that a charge is a 'fee,' and not a 'tax,' when the express language of the charge’s enabling legislation explicitly contemplates that its primary purpose is to defray the cost of services provided to those charged." 

And if it's a tax, it has to be approved by voters, under TABOR. 

"We are supportive of reinsurance and its success in reducing premiums," said Amanda Massey of the Colorado Association of Health Plans. But the bill aims to generate more revenue than is needed to fund reinsurance, she told the committee. It's likely to raise as much as $135 million, and she warned that those costs will be passed along to consumers and businesses in the form of higher premiums in the small- and large-group markets.

She pointed out that the fee would be charged to all fully-insured health plans, which make up about 32% of the market, to the benefit of those 7% in the individual market. She reminded the committee that Division of Insurance Commissioner Michael Conway had said last year that the state could not pass the buck onto the business community and ask them to pay for the individual market.

"This bill will do exactly that," she said. "This isn't about protecting reinsurance. This is about raising money for other programs."

The bill also drew opposition from the Denver Metro Chamber of Commerce, the Colorado Chamber of Commerce and the Colorado chapter of the National Federation of Independent Business.

Jason Hopfer, a lobbyist who represents CAHP and has been at the Capitol for two decades, said he's never seen a bill process like this. He told the committee he had seen a draft just last Saturday, and the bill introduced Tuesday was not the same.

"I've asked repeatedly for drafts and was told it didn't exist, when I knew it did, or wasn't ready ... this bill is much broader than just reinsurance." He said he had exchanged text messages with Rep. Chris Kennedy of Lakewood, one of the bill's House sponsors, and that was the limit of their involvement. On a scale of 1 to 10, where 1 is no involvement and 10 is intimate involvement, Hopfer characterized it at 1.5.

Hopfer said that in crafting the bill, the sponsors — Sens. Dominick Moreno of Commerce City and Kerry Donovan of Vail — involved only proponents, such as the Colorado Children's Campaign, but not the health insurers who would pay for the bill, Hopfer said. That was confirmed by a representative of the Colorado State Association of Health Insurance Underwriters.

Committee chair Sen. Julie Gonzales of Denver said they don't have to do stakeholding, and committee meetings could fill that role. "This is the place to have that conversation, to air the concerns and to work through them in order to produce good policy," she said. 

"Last time I checked, insurance companies are doing exceptionally well," added Sen. Faith Winter, a Westminster Democrat. She told Hopfer that one of the health plans had made a 6% profit in the first quarter, about $64 million, and questioned why insurers would pass on the additional cost to their members. 

Hopfer replied that comparing profits from a nationwide company to the state plan is apples to oranges. He also pointed out that insurers, after the passage of the Affordable Care Act, had what's known as a medical loss ratio that limits how much profit they can make. Currently, most insurers must use 80% of the premium dollar for health claims. Large insurers have an 85% medical loss ratio. "no one is talking about a medical loss ratio for doctors or hospitals," he added. "We're not willing to write a blank check."

Kennedy told Colorado Politics that the concerns over the fee are unwarranted, because of a repeal last year of the federal Health Insurance Tax. 

That tax — 3% — ends on Dec. 31, 2020, so health insurers would just pay into the reinsurance program instead of paying the HIT. There's an additional benefit, he claimed; the HIT is not tax-deductible but the reinsurance fee would be.

As to the concerns about the process, Kennedy said while he did a lot of work to engage with the insurance carriers, he did not speak directly with the brokers, calling it an "oversight."

Among those in favor of the new program, Caitlin Westerson of the Colorado Consumer Health Initiative told the committee that the program will increase access to health insurance.

"The pandemic has underscored what we already know: that access to care to one of us keeps us all healthier," she said, adding that SB 215 will build on the success of the 2019 legislation, and it would save the state $60 million in the general fund.

The program has had unintended consequences, she said. Unfortunately, when premiums fall, so does the financial assistance available to them. Some consumers did see premium increases, she explained. This bill will ensure everyone benefits from reinsurance equally. Consumers who were previously negatively impacted won't continue to pay more for health insurance.

Senate Finance Republicans had another concern: that the reinsurance program would subsidize insurance for undocumented immigrants. However, Brad Niederman of the underwriters group said that out-of-pocket expenses currently tied to the individual market plans, which are around $8,500 annually, have limited broad participation. 

Allison Neswood of the Colorado Center on Law and Policy addressed the issue. Immigrants are vital to the state's economy, culture and way of life, she said. "They work hard to support their families and to contribute to society, but the way society treats them in return belies the notion that we believe everyone who works hard should be able to get ahead. We have a unique opportunity to rewrite this story in Colorado."

Investing in uninsured families is right for our communities, she said. 

The bill passed on a 4-3 party-line vote and was sent to the Senate Appropriations Committee. 

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