New law may slow down health insurance hikes

A new law passed in the recently ended legislative session is aimed at helping slow down rising health-care costs by requiring insurance companies to get prior state review and approval before raising their premium rates.

House Bill 1389 – dubbed the “FAIR Act” for Fair and Accountable Insurance Rates – is scheduled for a June 5 signing by Gov. Bill Ritter. The new law will go into effect on July 1 and apply to health insurance rates that take effect on or after Jan. 1, 2009.

HB 1389 was proposed by Rep. Morgan Carroll, D-Aurora, and co-sponsored by Sen. Paula Sandoval, D-Denver. Originally, the bill was to require review of both automobile and health insurance premium increases, but Carroll said the auto insurance industry was able to remove its prior approval from the bill.

“The auto lobby got their way on that,” Carroll said. “There really are problems there, too.”

But Carroll said she feels proud in having been able to make the health insurance industry a little more accountable for steadily climbing rates that have resulted in more and more Coloradans not being able to afford health-care coverage.

Carroll noted that for a typical Denver family of four, health insurance premiums have gone up more than 140 percent over a five-year period while wages increased only about 15 percent. She also noted that Colorado has the seventh-highest insurance rates in the nation despite one of the healthiest populations.

Colorado in minority

The reason? Colorado was one of only 12 states that did not have some kind of prior review for insurance companies to justify their rate increases.

“They’re padding their profits in this state basically because no one is paying attention,” she said.

Carroll acknowledges that insurance companies have had to file their intended rate increases with the Colorado Insurance Commission “but the statute doesn’t give the division any power to say no before they’re approved.”

She calls the current system “window dressing” that “doesn’t mean anything” when it comes to putting the brakes on insurance rate hikes. “The culture in this state allowed them to do any rate increase at any time.”

Carroll said her bill was strongly supported by small business.

“I did a survey that showed the No. 1 issue for business was (health-care) premiums,” she said. “At some point, you have to trade off wages or profits or stop offering insurance.”

Mike Huotari, executive director of the Colorado Association of Health Plans, said his organization “vigorously” opposed the bill when it was first introduced.

“But as time went on, through negotiations they addressed some of the major issues we had in terms of making it workable, so we ended up in a neutral position on it,” he said.

Huotari said 85 cents of every health insurance premium dollar now goes to cover benefits, with only 15 cents going to administration and other costs.

“The bill focuses on that 15 percent, and at the end of the day, even prior approval can’t do much about that,” he said.

Existing system fine

Huotari said Colorado’s existing insurance review system was working fine and he disputes any notion that health insurance profits are soaring.

“It’s a misconception that there are record profits in the health-care industry compared to other industries,” he said, attributing escalating costs to rising drug costs and pricey new technologies that Americans demand.

Carroll said getting her bill passed was not easy.

“It was unbelievably difficult to get it through the legislature for a number of reasons,” she said. “The insurance industry basically ran a duck-and-cover” attack on the bill behind legislators beholden to it, Morgan said.Carroll said California recently passed a similar prior review and approval law that “saved $711 million in 2007 alone on rate hikes that in Colorado would simply have been rubber-stamped.”

Carroll said the new law will also track how much of each proposed rate hike is to cover health-care expenses and how much would be spent on administration and business overhead.

The new law’s bottom line, Carroll said, is to help Colorado get a better grip on rising health-care costs.

“This is about affordable access to health care and insurance industry oversight,” she said. “I think it will slow the rate of increases and provide more transparency so we can all make better decisions. And I think that’s huge.”

Steve Porter covers health care for the Northern Colorado Business Report. He can be reached at 970-221-5400, ext. 225, or at sporter@ncbr.com.

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