New health insurance law causing confusion

Small business owners and their employees who have been staggering under constantly increasing health-care costs are again facing an uncertain new year as a bill passed in 2007 takes full effect.

House Bill 07-1355 was designed to give small business, especially those who have employees with chronic or serious health conditions, some relief from health insurance premium hikes.

The bill removed two rating factors – health status and claims experience – that could be used by small-group insurance carriers when seeking approval for rate hikes from the Colorado Division of Insurance. Insurance companies were still permitted to use other factors, including age, family composition, type of industry, tobacco use and geographic location, in setting rates.

The bill also removed so-called rate “discounts” of up to 25 percent that insurance companies offered to healthy small business groups with minimal claims.

The discounts go away on Jan. 1, and some insurance companies are warning that some small employer groups may be looking at big premium increases.

“Some of our employer groups could see premiums go up 30 to 40 percent,´ said Lew Emanuelson, vice president of sales for Anthem Blue Cross/Blue Shield in Colorado.

And that could result in even more employees losing health-care coverage, he said. “I can tell you we do anticipate that small-group employers will be looking seriously at being able to continue to offer health-care coverage to their employees.”

Emanuelson and some others in the insurance industry blame HB 1355 for what they predict will be significant hikes in premiums for Colorado small business in 2009.

“We have been very proactive in talking to the Legislature and the governor and the insurance commissioner in trying to explain this to them,” Emanuelson said. “They wanted to level out the risk pool, but truthfully they did not understand what they were doing.”

Cindy Sovine-Miller, a spokeswoman with the Colorado State Association of Health Care Underwriters, said her group lobbied against the bill and still thinks it was a bad idea.

Sovine-Miller said some brokers in the association have been offering discounts to small business employers with good claims histories, with about 60 percent of those employers receiving discounts of 1 percent to 25 percent, and eliminating the discounts is going to create a hardship on those employer groups.

“Philosophically, we understand what (bill supporters) were trying to do but we’re looking at the cost implication,” she said.

Some insurers are offering to let small business groups now receiving discounts to do an “off-cycle renewal” – renew their policies before they’re due in 2009 – to hold onto their discounts for a little longer. However, that off-cycle renewal must be done before Jan. 1.

Red herring

But some aren’t buying the insurance industry’s take on HB 1355. Robin Baker, senior policy analyst for the Denver-based Bell Policy Center, said arguments made by the insurance industry that HB 1355 will cause insurance rates to go up are misleading at best.

Baker, who studied health insurance regulation in Colorado and seven other states, said the study showed that “small-group rate regulations have minimal impact on premium costs and the willingness of insurers to serve this market.”

“Premiums keep going up in every state, regardless of the ratings structure,” she said. “It’s like a red herring.”

Baker said Colorado small businesses remain on track for average premium increases in 2009, which have been trending about 10 percent to 12 percent each year. Having HB 1355 in place may be holding down those premiums in some cases, she suggested.

“The small-group market is just going up,” she said. “I think this was a really important first step toward achieving some kind of health reform to bring premiums down.”

Marcy Morrison, director of Colorado’s Division of Insurance, said insurance rate filings for small groups for 2009 are not showing any wildly upward swings.

Morrison said filings made by mid-October by companies covering about 95 percent of the small group market showed most of the rate increases – about 58 percent – averaging between zero to 20 percent.

“We finally decided this fall that some of the information being presented was not accurate,” she said. “It seems that some people were just throwing numbers around.”

No dire consequences

Tony Gagliardi, director of the Colorado chapter of the National Federation of Independent Business, said his organization supported HB 1355 and continues to do so.

“They just won’t let it go,” Gagliardi said. “There’s a renegade group of brokers out there that are spreading this idea that the sky’s going to fall.”

Gagliardi said there’s been an ongoing chorus from some in the insurance industry who keep warning of dire consequences of HB 1355. “A year ago we heard this was going to raise rates by 60 percent, which is just a fallacy,” he said. “It’s still a competitive marketplace out there, and if your rate does go up 40 to 60 percent, don’t you think people would be looking at a different carrier?”

Morrison said in some very limited instances small employer groups may have premiums rise by 40 percent or more, but that group won’t account for more than 10 percent of the market.

Denise de Percin, executive director of the Colorado Consumer Health Initiative, said the passage of HB 1355 was a priority for her group and she believes it is “good policy” that moves the state toward a better and fairer system of insuring small business employees.

“It’s really about the pooling of risk, which is what insurance is supposed to be all about,” she said. “There’s a whole slew of things you can do nothing about – like being in an accident or getting a disease – and we shouldn’t penalize individuals and small business for that stroke of luck.”

De Percin said HB 1355 is also good for small business because it keeps a company with an unhealthy but productive employee financially competitive with a similar firm that has all healthy employees.

“I think it evens out operating competition between small businesses,” she said. “We actually think it’s better policy, better for the small-group market and the wave of the future. You can’t talk about economic recovery without talking about health-care reform, especially for small business.”

Morrison said the verdict is still out as to the ultimate impact of HB 1355 because it was only partially in effect in 2008.

But has it helped?

“I don’t think I can really answer that,” she said. “Some small businesses would say absolutely. I think we need a year of data after it’s been fully implemented, and I can tell you that at the end of ’09.”