Colorado Health Insurance

Members Login

Post Info

TOPIC: House Bill 1355 and Small Group Insurance Rates - How does it affect your premiums?

Anonymous

Date: Sep 27, 2008

House Bill 1355 and Small Group Insurance Rates - How does it affect your premiums?	Permalink

House Bill 1355 (HB-1355) is a Colorado bill, pertaining to small groups of 1-50 employees, that passed in 2007 to remove rating flexibility from the small group market place. Read more to find out how this affects your premiums as a small group employer or employee: History: Prior to 2004, The premium rates that Colorado insurance companies filed with the division of insurance were subject to Modified Community Rating. Modified Community Rating disallows insurance companies from being able to rate premiums based on health status. While on the surface, this may sound like a good idea, this kind of system disallows any kind of premium discount rewards for healthier groups, as the basis for modified community rating is to keep premiums the same for both healthy and unhealthy groups alike. As healthcare inflation rises, this kind of system discourages "healthy risk" from remaining in small group market, since healthy people will tend to leave the higher priced group market in favor of cheaper and better alternatives available through personal health insurance plans. Unhealthy people, however, regardless of premium inflation, have no choice but to remain covered under guaranteed issue small group health plans, because they cannot medically qualify for lower priced, medically underwritten, personal health plans. This trend becomes a self-perpetuating problem, because as healthy risk leaves the small group marketplace, insurance companies are forced to raise premiums to compensate for the extraordinary claims experience generated by unhealthy risk. Premiums inflate, more healthy risk leaves the small group market, so premiums inflate again, and so on, and so on... Because of the loss of healthy risk created by Modified Community Rating prior to 2004, competition in the small group marketplace dwindled, as insurance carriers began to find the small group marketplace unprofitable. Loss of competition leads to more inflation, which leads to more loss of healthy risk, which leads to more inflation, and so on, and so on...By 2003, there were only 4 major carriers left competing in the Colorado marketplace. These included Blue Cross, Humana, United Healthcare and Kaiser Permanente. *Community rating with minimal flexibility led to a mass exodus of health insurance carriers and retraction of competition in the small group marketplace from 1994 - 2003.* In an effort to stop this trend, Colorado Republican legislators rallied to pass legislation at the end of the 2003 legislative session (HB-1164) to allow limited rating flexibility in the small group market. This flexibility allowed insurance carriers to offer up to 25% off of filed rates for healthy groups, and up to a 10% surcharge for unhealthy groups. The rating flexibility law has only been operating fully just over 3 years. Reform of this type works longer term (5-7 years) to calm the market by attracting healthier groups, which mitigates adverse selection and helps to stabilize all premiums. Even in the short time frame after HB-1164 went into effect, there was early evidence of a moderating premium trend. While the longer term effect of rating flexibility is difficult to measure in just 3 years, *early indicators showed stabilization in premium pricing. In addition, statistics indicated that small group participation was increasing* in Colorado. This was due not only to stabilizing premiums, but also the new array of innovative product choices brought to the market by increasingly competitive insurance carriers. Competitors began to enter or re-enter the small group marketplace in Colorado after passage of this legislation, which helped to stabilize rising premiums. The new competitors included Rocky Mountain Health Plans, Pacificare, Assurant Health, and Aetna to name a few. By 2006, approx. 62% of small groups were receiving premium discount rewards for good health*. But towards the end of 2006, the Democratic majority in the Colorado legislature decided that it was unfair* for healthy groups to receive better rates than unhealthy groups. They passed House Bill 1355 to remove rating flexibility, once again, from the small group marketplace in favor of Modified Community Rating. Beginning January 2008, insurance carriers were no longer allowed to surcharge unhealthy risk by 10%, and beginning January 2009, insurance carriers will no longer be allowed to discount healthy risk by 25%. The ability of the carrier to rate risk, within highly regulated constraints is an important mechanism to manage risk, stabilize premium costs, and breed increased competition among the various carriers. Without such a mechanism, premium costs have to be adjusted to reflect the worst case risk. Higher premium pricing for everyone will be the result. While unhealthy groups received the temporary benefit of lower rates in 2008, the removal of discounted rating flexibility for healthy groups starting January 2009 is already wreaking havoc on premiums for both healthy AND unhealthy groups renewing on or after January 1st 2009. As insurance brokers, we are seeing, first hand, the results of this irresponsible legislation. Modified Community Rating hurts everyone, including those that the legislation was intended to help. But please rest assured that Erickson Financial Services is doing everything we can to mitigate your premium inflation. If you are an existing client and have concerns about your health insurance renewal, please contact us to speak with Scott Erickson. Our home website is www.efsbenefits.com . Click here for a list of Colorado Representatives who voted to pass House Bill 1355, resulting in the inflation of YOUR health insurance premiums beginning January 2009: http://www.csahu.org/files/295/documents/HB1355_Those%20in%20Favor.pdf If your premiums went up due to this legislation, we want to hear YOUR story. Did you lose your healthy group discounts? How much did your group's premiums go up in terms of percentages? We need your input, so that we can tell YOUR stories to our legislators. -- Edited by Lynne Erickson at 10:45, 2008-12-18 __________________

Page 1 of 1 sorted by

Tweet this page

Post to Digg

Post to Del.icio.us

Create your own FREE Forum
Report Abuse