Final
Interim Committee on Health Insurance
HEALTH INSURANCE
Votes:
Action Taken:
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10:05 AM
Senator Hagedorn called the meeting to order and introduced Jo Donlin, Colorado Health Institute, who offered an overview of reinsurance. She provided a handout to the committee (Attachment A). She described the components of reinsurance, which insures insurance companies and makes premiums more affordable by the state taking responsibility for high cost claims. There are two types of reinsurance. The first is aggregate stop-loss reinsurance, which is protection against annual losses of an employer group up to a certain level. Excess-of-loss reinsurance protects insurers on an individual insured basis for those with extraordinary medical expenses. The cost of reinsurance is based on the number of individuals covered, the range of expenses to be covered, the distribution of expenditures, and the cost-sharing mechanism. There is a "layer," or range of expenses, covered by reinsurance that is determined by an attachment point and an upper limit. The attachment point is where reinsurance is activated and the upper limit is the maximum amount paid by reinsurance.
10:21 AM
Two states currently provide state subsidized reinsurance, Arizona and New York. Arizona's is an aggregate stop-loss program and New York has a loss per insured person (excess-of-loss) program. The states have different incentive structures to their programs. Arizona is trying to keep total health care costs down for all plans, not just for high cost individuals. In New York, there is an incentive to manage high cost individuals in a different way, separate from the overall insured population. Ms. Donlin described in detail the reinsurance program in Arizona. Committee discussion ensued. In determining the effectiveness of a reinsurance program, Ms. Donlin pointed out that the cost of the uninsured to the community should be considered alongside the potential cost of reinsurance. Discussion continued.
10:41 AM
Ms. Donlin continued her discussion describing the Healthy New York program. All HMOs are required to provide the various plans. She cited another handout she provided to the committee that showed premium decreases under the Healthy New York plan (Attachment B). She then discussed the issues Colorado might want to consider in designing a state subsidized reinsurance program, particularly with regard to operation of the plan and estimating the costs of the plan. She responded to questions from the committee.
10:59 AM
Ms. Donlin then briefly discussed SB 05-237 (Healthy business Healthy People Program). The legislation had two components, a small business component and a Cover Colorado subsidy. The bill would have created a 5-year pilot program that would test a standardized, low-cost insurance plan for small employers (fewer than 10 employees) and individuals. She listed the various criteria for participation in the program.
11:05 AM
Barbara Brett, Executive Director of Cover Colorado, began her discussion of how Cover Colorado could increase access to health insurance, whether through reinsurance or by direct subsidy. She provided a handout to the committee (Attachment C). She discussed how Cover Colorado's program currently works. Individuals pay 150% of the market rate, the state contributes approximately $20 million, any additional costs are covered by an assessed amount paid by all insurance companies, if necessary. SB 05-237 would have created a program for individuals who were deemed uninsurable with a specific income limit and a set total eligible enrollment. She discussed the differences between New York and Colorado, which might indicate that using Cover Colorado as the reinsurance manager would not be the best choice. New York requires guaranteed issue, regardless of pre-existing conditions, etc. In addition, community rating in New York ensures that everyone is paying the same rates, making them more affordable for older or sicker people. Cover Colorado is a program specifically for individuals in the state who have been denied insurance coverage because of pre-existing conditions.
11:21 AM
Ms. Brett discussed how a direct subsidy might work more effectively to reduce premiums, deductibles, and out of pocket expenses for those who are qualified. Enrollment in the program would be capped in the first year to build a reserve of funds. The lifetime maximum would be lower than Cover Colorado provides currently with a lifetime maximum of $250,000.
11:31 AM
Senator Hagedorn discussed the agenda for the afternoon after the lunch break. The working groups have been asked to respond to the idea of reinsurance, particularly SB 05-237. The committee recessed until 1 p.m.
01:08 PM
Senator Hagedorn called the meeting back to order and introduced testimony by the providers working group. Charlie Hebeler of the Colorado Nursing Association and Colorado Dental Association, and Dr. Dave Downs of the Colorado Medical Society, Colorado Coalition for the Medically Underserved, and American College of Physicians, testified. Ms. Hebeler began by discussing the meeting of their working group. They talked about a variety of things, including their concerns regarding SB 05-237 and the fact that small businesses have substantial difficulties in accessing the insurance market. Small businesses that have already provided insurance should not be penalized. They also discussed the design of different program options. They are concerned about the filters that are designed to keep people out of the programs (i.e. 10 or fewer employees, hasn't offered insurance for the last 12 months, income cut-offs, etc.). She wants the committee to be very careful about excluding people from a potential program to make the group as large as possible in order to spread the risk and the benefit. Small businesses believe that the standard plan developed by the commissioner of insurance is the best place to start in order to best preserve the health of the people in need of service. They do recognize that improvements are needed.
01:15 PM
Dr. Downs began by reminding the committee of the uninsured population in Colorado (750,000) and how lack of insurance can lead to premature death and suffering through lack of periodic screenings and basic medical care. He moved on to discuss the standard benefit package and why the group thinks it is the best place to begin. The standard plan prevents gaming the system. The mechanism by which premium prices come down is to create a marketplace where plans have to compete with each other and it's best if there is a standardized benefit plan, although he thinks the current one could use some updating. Dr. Downs' focus is on saving money and improving care. He encouraged the committee to evaluate and develop a Colorado standardized benefit package. Representative McCluskey asked if the group talked about whether the state should subsidize a reinsurance plan or if companies should go back and charge those who already have insurance. Ms. Hebeler said the group presumed it would be a state-sponsored program. Dr. Downs discussed a study done at the Harvard School of Public Health, which recommended that the money come from the state, at least initially, because private reinsurance companies don't feel like they have enough data to make them willing to enter the market. Ms. Hebeler then talked about the group's extensive discussion of cost shifting. She admitted the prevalence of dishonest and inaccurate billing and said the group would be willing to work with the legislature to come up with a plan to reduce that. Administrative paperwork adds a tremendous amount of cost to what can be provided. She also stressed the need for adequate reimbursement.
01:25 PM
Senator Shaffer asked if there was a way to quantify excessive administrative costs. Dr. Downs answered with the many different ways that overhead is generated. He listed things like records technicians and benefits management companies as examples. He believes overhead is somewhere around 20% of costs in the private insurance market. More information will be forthcoming from Dr. Downs regarding administrative and overhead costs. Ms. Hebeler continued by stressing the need for accurate diagnoses as a way to save money that is often wasted by misdiagnoses or inadequate diagnoses. The group is also concerned with services that might not be included, such as mental health.
01:30 PM
Testimony continued with the health insurers group. Rebecca Weiss, Anthem Blue Cross and Blue Shield and Steve Erkenbrack, Rocky Mountain Health Plans, testified. Their group chose to focus on the concept of reinsurance, particularly Healthy New York. Mr. Erkenbrack noted that the market in NY is very different than in Colorado and that Healthy New York has not worked out quite like it was expected. This program has played out as a transitional program, rather than as an alternative to small groups, which was the original expectation. The Healthy New York program scaled back benefits (mental health, only in-network providers, etc.). The lack of initial participation led to a significant advertising campaign. Because you focus only on businesses that don't currently offer insurance, you are creating a competitive disadvantage for companies that do offer insurance.
01:36 PM
Representative Green asked about large companies paying less per premium for an employer and small companies paying more because of the size of the pool. Mr. Erkenbrack answered and said that it depended on what group the company is in. A large group is experience rated, while a small group is rated on the basis of the community to which it belongs. Representative Green continued with her concern that large companies have such a huge competitive advantage over small companies. Mr. Erkenbrack stressed that no one is having an easy time in the market right now, but it really depends on the circumstances more than the size of the company. Ms. Weiss mentioned that it also varies depending on how much and to whom a company chooses to contribute to the premium. Mr. Erkenbrack continued speaking about the group's concerns about the small amount of money appropriated by SB 05-237 and their fear that inadequate funds will lead to cost shifting and exacerbating problems for small employers. There is no way for the insurers to predict participation under SB 05-237 and they cannot confer with their competitors because of antitrust issues. He believes these factors make it risky for the insurers. He stressed three things. First, Colorado should not penalize employers that are currently offering insurance. Second, he narrow the project and really use the allocated funds appropriately and not dissipate the effect. Finally, take advantage of the market. Put it out for RFPs to Anthem or Kaiser or any other health plans. Also, consider other alternatives.
01:45 PM
Senator McElhany asked for clarification about how things are excluded from coverage. He wanted to know if Healthy New York dictates what the underlying policies contain. Mr. Erkenbrack attempted to answer by pointing out that New York and Colorado have different concepts of mandated benefits. Healthy New York does dictate what the underlying policies contain. Senator Mitchell asked about inequity relative to growing companies that start out under the limit of 10 employees and grow over that amount. Would they have been they kicked out of Healthy Colorado (SB 05-237) as they grow? Mr. Erkenbrack's understanding is that the bill didn't address that situation. Senator Mitchell expressed his concern that a situation like that is a disincentive to grow. Representative Green asked what difference in cost and premiums was experienced by insurers when mandate light was instituted. Mr. Erkenbrack did not think there was a significant change.
01:53 PM
Ms. Weiss addressed issues related to bringing insurance to low-income workers. She (1) urged against government subsidies that crowd out plans offered by the private market, (2) advocated targeting the eligible population, and (3) advocated ensuring that the program is administratively simple so the benefits go to the insured. Sen. Shaffer wondered how you do the first two and still keep it simple. She gave the example of not replacing employer-sponsored coverage with a state-sponsored plan. If an employee is eligible for an employer-sponsored package and a state-sponsored package, he or she would be required to utilize the employer option. Another example would be to craft a program where, to be eligible, an individual would need to fall within a certain income level rather than creating a program for an employer's entire workforce. She proposed that subsidizing the worker share of a premium has great merit (premium assistance). Sixteen states have already implemented a premium assistance plan. A solution like this taps into existing plans and nothing new needs to be created. Each employee receives the same plan. It is a means to help a low-income worker afford the plan offered by his or her employer. She cited the example of Idaho's plan, where small businesses apply to participate in the program, the state determines eligibility, and the employer informs their insurance company of their intention to participate in the program. The state pays a portion of an eligible adult or child's monthly premium, up to $100 for an individual and $500 per family. Sen. Hagedorn expressed concern that a premium assistance program provides no incentive for an insurance carrier to maintain efficiency in delivery of the product. Ms. Weiss replied that this is no different than any other employer sponsored plan. Discussion ensued about premium subsidies and their relative merits.
02:03 PM
Representative Green asked for data on how successful premium subsidy plans have been. Ms. Weiss offered to send that data. Ms. Weiss added some other alternatives to premium subsidies, including a corridor of risk or a set amount per enrollee. Senator Hagedorn noted that the small group market is declining and posed the question about whether the state wants to subsidize a failing system.
02:11 PM
The consumers group began with Lorez Meinhold of the Colorado Consumer Health Initiative discussing the need to moderate high premiums and make coverage more affordable to low-income workers. Her group is very interested in an equitable application of any plan to expand health insurance to small employers. She stressed the need to design any reinsurance program very carefully. Pricing is the most critical component of the program. The group wants to make sure there are protections included for the consumers, especially low-income workers. She talked about the distinct differences between reinsurance and Cover Colorado. She presented some of the group's concerns about SB 05-237 (Attachment D). A.W.
Schnellbache
r
, a volunteer with
AARP, talked about how to increase insurance coverage for all citizens in Colorado. AARP has not taken a position on reinsurance, but they support community rating because it spreads the risk over a larger group of people. He wants more transparency over the whole system and cannot support an increase in health savings accounts because it means (to them) more cost shifting and higher premiums. They advocate anything that would provide a good independent evaluation system.
02:20 PM
Chris Hapgood, Director of Public Policy of the Mental Health Association of Colorado, spoke about the group's concerns with benefit levels and community rating. His group thinks required coverage should include mental health, mammography, cancer screenings, prenatal care, etc., because preventative care will save money down the line. He gave statistics about the costs of untreated mental illness, which create a cost shift. Senator McElhany asked if the state is looking at the right model to try to put the uninsured through an insurance program. He wondered if the committee should explore other ideas for getting care to these individuals. He suggested community health centers with greatly expanded functionality. The committee discussed the use and funding of community health centers.
02:35 PM
Senator Keller commented that health insurance is a huge burden to businesses. She believes the system is outdated and posed the notion that employers play money into a pool that would fund hospitals and community centers. This would relieve businesses of the burden of overhead and administrative costs. Mr. Hapgood mentioned some other alternatives to the current health insurance system. Senator Shaffer pointed out that Senator Keller's idea amounts to a new tax on businesses.
02:42 PM
Senator Hagedorn recessed to wait for the employers group to arrive.
02:56 PM
Senator Hagedorn called the meeting back to order. The employers group came to the table. Travis Berry, representing the Business Council on Health Care competition, and Bill Lindsay, co-chair of the Denver Metro Chamber of Commerce, presented the findings of their group. Mr. Berry gave a Power Point presentation, which is Attachment E. He provided the group's analysis of SB 05-237. Employers think it is equitable with some qualifications. It is sustainable as long as the state continues its commitment after the pilot program ends. Reinsurance can be efficient, but he urged a focus on using existing private insurance products, rather than having the state create an entity to administer the program. The group will be working on a matrix of the various proposals that will use the criteria of accountability, equitability, sustainability and efficiency to determine which one is the best for Colorado. He offered to share those recommendations with the committee. The committee discussed the merits of using existing insurance products, in terms of the efficiency of reinsurance. The committee and the panel also had a short discussion about ensuring direct care for individuals, as an alternative to the traditional insurance model.
03:10 PM
Mr. Lindsay read a prepared statement (Attachment F). Senator McElhany expressed a concern that Mr. Lindsay's example of the Washington Basic Health Plan would result in adverse selection. Senator Shaffer asked a question about what it means for employee sponsored health insurance to be affordable. Mr. Lindsay responded that he did not know exact numbers, but studies indicate that unless a given program can subsidize more than 50% of the premium, employees won't elect to use it.
03:27 PM
Senator Hagedorn discussed starting future meetings earlier and ending later in order to address network adequacy issues. He asked for concluding comments. Representative Riesberg asked when legislative proposals were due. Staff provided a deadline of October 15, 2005. Senator Hagedorn adjourned the meeting.