Time:09:03 AM to 12:24 PM
Kerr J.
Place:HCR 0112
This Meeting was called to order by
Representative Gardner B.
This Report was prepared by
Bill Zepernick
Gardner B.
X = Present, E = Excused, A = Absent, * = Present after roll call
Bills Addressed: Action Taken:
Presentation by the Colorado Health Benefit Exchange
Discussion of Grant Proposal
Public Comment
Comments from Committee Members
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only
Witness Testimony and/or Committee Discussion Only

09:05 AM -- Introduction

Representative Gardner gave opening comments about the committee agenda (Attachment A) and the grant proposal (Attachment B). He mentioned that a meeting is scheduled for August 13. Representative Gardner noted that the chair and vice-chair can approve the grant themselves, but that the meeting is ready in event that the entire committee needs to take action on the grant proposal.

120731 AttachA.pdf120731 AttachB.pdf

09:07 AM -- Presentation by the Colorado Health Benefit Exchange (COHBE)

The following witness came to the table to provide an update on COHBE activities and answer committee questions:

Ms. Hammer began her presentation with an overview of board activities, and she mentioned that the board has conducted over 30 public meetings. She then described the working groups and leadership of the board. Ms. Hammer described the recent annual meeting of the board and leadership elections. She then discussed information technology (IT) implementation progress. She described tracking key deadlines and goals, as well as facilitating community involvement. She then described the different advisory groups working with the board and the input that was provided. She discussed how Senate Bill 11-200 allowed the people to be appointed to the COHBE Board that had the right mix of needed skills.

09:16 AM

Ms. Fontneau proceeded to give an operational update and discussed significant contracts that have been entered into. She described the IT request for proposal (RFP) process and the selection of vendors. CGI is the system integrator, along with various other support vendors. She talked about the process for determining system requirements and ensuring that the system RFP includes all the necessary components. She said that testing of the system will start in January, and that the pilot of the system will begin in May or June.

Ms. Fontneau talked about community outreach efforts, but said that there has not been educational public marketing. She discussed how the exchange will operate in a competitive insurance market place and that such marketing work has to be done to build the brand and get people to purchase through the exchange. She described the new location for the COHBE office.

09:22 AM

Mr. Ruiz-Moss discussed the work of the committee and their financial tracking and controls. He described benchmarks for determining grant amounts. He described the thousands of people who will be subsidy eligible in 2014 and the steps to make sure the system works from day one when people want to begin purchasing.

09:25 AM

Representative Gardner open the floor to questions.

Senator Lundberg asked about how, if the exchange were a true business venture, could it pay for its costs without grant funding or to cover past grant funding? Ms. Hammer responded that one key deliverable is to be self sustainable by 2015, and that self-sustainability is a key goal of the grants. Ms. Hammer said that a full financial model has not been completed, due to certain uncertainty, but that the process is continuing.

Senator Lundberg stressed that his focus is on inquiring about the viability of the model and that sustainability should be the first question, not the last question. Ms. Fontneau stated that there are likely 9 to 12 funding mechanism that could be considered and would be viable, and that the final determination about which makes the most sense has yet to be determined and that the board will consult with the committee on this issue.

Representative Summers asked about the timeline for the grants and the included IT build out, and future plans. Ms. Fontneau said that they expect the third grant to be comparable to or less than the current, second grant proposal. Mr. Ruiz-Moss talked about the up-front IT costs and how this will reduce overall costs in the long run, and stated that the IT investment is necessary to support the large number of persons needing to purchase insurance.

Representative Summers asked if the goals of Senate Bill 11-200 will be met, in terms of building a Colorado-specific solution. He asked about how the exchange differs from a federally mandated exchange. Ms. Fontneau said that they make decisions based on what is best for Colorado. She said that they are not tracking federal progress in implementing exchanges, but have been in contact with other states about their exchanges. She talked about how states with similar IT designs could share technologies and services and drive down costs. Ms. Hammer said that they take meeting the needs of Colorado seriously. She talked about the unique aspects of the exchange in Colorado. She talked about how other states have an active purchaser model, whereas Colorado is an open market. She talked about building on the work of the Division of Insurance.

Representative Summers asked about what happens if the exchange does not meet the federal certification requirements. Ms. Fontneau described the blueprint for state exchange, including security and financial controls, as well as technological preparation.

Senator Roberts asked where the state is in determining essential health benefits. Ms. Hammer said that Division of Insurance has been leading that conversation and working with the COHBE. The exchange provides a supporting role in that process. Ms. Fontneau described the nine potential benchmark plans that had been put forth and said that these options are listed on the COHBE website. Public meetings were conducted to discuss the possible plans and feedback from the public has been solicited.

Senator Roberts asked about the sustainability of the marketplace, which will be affected by mandates and the essential benefits required, given that these affect the costs of products on the exchange. Mr. Ruiz-Moss said that essential benefits will be required for plans both in and outside the exchange in the individual and small group markets. He discussed the actuarial work required.

Senator Roberts asked why people will go to the exchange if same benefits are in plans outside exchange. Ms. Fontneau described how the exchange will provide information and allow consumers to compare plans, just like Expedia allows people to compare airfare. They can make better decisions about cost sharing and premiums and find the best plan for them. Senator Roberts mentioned that subsidies are also a draw to the exchange, besides just the information provided.

09:50 AM

The witnesses continued to respond to questions from the committee.

Senator Roberts asked about deficit reduction and sequestration at the federal level, or what would happen if the subsidies or tax credits were to go away in part or in whole. Ms. Fontneau said that subsidies were not the only draw, and that the exchange provides benefits by creating an open marketplace and sharing information. She also talked about increasing the ease of administration for small business through the exchange. Ms. Hammer also noted that she is looking forward to the small business health option program (SHOP) exchange for her small business. She noted that the exchange will give employees at small businesses more choice and doesn't force the employer to make one decision on behalf of all employees. Ms. Hammer discussed how 14 percent of people do not know how to get insurance, which has increased as more people have lost jobs and the support of human resource divisions in their places of work.

Senator Roberts asked about horizontal integration, and stated how Senate Bill 11-200 did not intend that to happen, and asked if it was possible. Ms. Hammer discussed contracts and IT solutions, and how they are aiming for minimal interoperability to ensure that the system connections with public systems are present, but stated that they are not redesigning public systems as in some other states. Ms. Fontneau described the exchange's goal of "no wrong door" and being able to refer people and their information to other systems, such as the Colorado Benefits Management System (CBMS).

Senator Roberts commented that it would be a shame to displace the purpose of Senate Bill 11-200, that the exchange should not supplant the role of CBMS and other systems, that a hybrid system is not desirable, and that businesses do not want to be a second layer of the public health system. Mr. Ruiz-Moss noted that they need to be able to accommodate people who go on and off Medicaid.

Senator Aguilar asked about essential health benefits and who makes the ultimate decision, and if the legislature can provide feedback.

Representative Tyler expressed his concern about building a large IT system and asked why they feel comfortable with the vendors ad sub-vendors and their experience. Ms. Fontneau described the experience of CGI, the system integrator, and their references and the RFP evaluation. She also described the internet portal provider and their background and stated that they are relying on proven technology.

Representative Tyler asked about past benchmarks and if they are being met. Ms. Fontneau said that it is a tight timeline, but that vendors are meeting the goals. She described their steps working with the vendor to meet goals and benchmarks. Representative Tyler asked if they have enough end user input in developing their system requirements. Ms. Fontneau mentioned the advisory groups, public comments, and stakeholder input.

Senator Nicholson asked if the goal of meeting today was to review the process, not necessarily the final outcomes. Ms. Hammer said that is partly true and then describe the hard work of Ms. Fonteau and her confidence in the staff, board, and stakeholders in making the marketplace successful.

Representative McCann asked if there was an October 2012 deadline for determining essential health benefits. Ms. Fontneau said that is true, and said that there is a default option, if no plan is identified, under which the essential health plan is set by federal law based on certain plans in the state. Ms. Fontneau described how they came up with the nine essential health benefit proposals.

Senator Boyd asked if there would be a third system built that would be the decision engine for both the public and the COHBE system. The witnesses indicated that Senator Boyd was correct. Senator Boyd noted that the IT investment is crucial to ensure a working product.

Senator Lundberg described his experience with CBMS and its funding. He asked about how the exchange differs from and other providers that currently offer comparisons of health insurance policies. He also asked about the role of current brokers. Ms. Hammer noted that the board has not made decisions about brokers versus navigators. She said that they have studied how employers work with brokers and found that they are a trusted source of information.

Senator Lundberg then asked about pre-qualification for public entitlement benefits. He asked if persons who are currently eligible for public programs but not using them and do not want to receive such benefits could purchase insurance through the exchange. Mr. Ruiz-Moss noted that they can purchase without a subsidy. Ms. Fontneau said that they do a screen and refer for Medicaid based on income and citizenship. They do not take into account the full range of Medicaid eligibility, which is done on the Medicaid side.

Representative Gerou joined the committee. She shared information with the committee about the recent CBMS changes and improvement efforts.

Senator Roberts asked about people going on and off Medicaid and how the exchange knows and validates citizenship and income. Ms. Fontneau described interaction with other systems, such as checking income against a federal hub and possibly against state sources. If information cannot be found through an electronic check, the applicant will be asked for other forms of verification. Senator Roberts asked about people intentionally entering false information. Ms. Fontneau said that is something to be addressed. Senator Roberts said that she hopes the vendor has robust fraud detection.

Senator Roberts asked about the exit strategy in the event that there are no further federal funds are available. Ms. Fontneau noted that this grant gets the exchange through the pilots, or about 80 percent through the IT implementation. She said that Senate Bill 11-200 precludes the use of state funds, so if the exchange were 80 percent done, they could turn to other private sources if federal funding is not available. Ms. Fontneau discussed what would happen if the exchange went away, but noted that policies sold would be valid. Mr. Ruiz-Moss noted that subsidies go straight to the insurer, and the exchange does not get a piece of that funding.

Senator Roberts asked about the commitment for consumers and how long the policy contracts would last. Mr. Ruiz-Moss noted that they cannot predict how the situation would be resolved if subsidies went away. He noted that year-long contracts would not be required but that there would be things like open enrollment periods.

Senator Roberts asked about regional collaborative efforts, e.g., in the Rocky Mountain region, and what possibilities exist for achieving economies of scale. Ms. Fontneau answered in the affirmative and said that they continue to have discussions with other states and are developing models for cooperation and ways to drive down ongoing costs.

Representative Gardner noted that there is debate over who decides essential benefit exchange. Ms. Hammer says that Senate Bill 11-200 implies that duty lies with Division of Insurance and that they are discussing how the COHBE can work within that process.

Representative Gardner asked if there was need for legislation for the next session, both generally and for essential health benefits. Ms. Hammer said that they know there is the opportunity to pursue interim legislation, but that they did not have any specific ideas at the moment. Representative Gardner discussed the issue of insurance mandates.

10:47 AM

The committee took a brief recess.

10:54 AM -- Discussion of Grant Proposal

The committee came back to order. The witnesses provided several documents to the committee:

Ms. Hammer began her presentation of the grant proposal, which is a second Level 1 grant and is a continuation of the work funded by the prior grant proposal. The COHBE board approved the grant for scope and focus. She discussed aligning the budget proposal with the work to be done. She stated that all board members approved the budget numbers included and that the board is scheduled to meet on August 13 to give final approval, after the review committee has had a chance to provide its feedback and take action. She talked about the grant objectives.

Ms. Fontneau discussed the issue of benchmarks. She noted that six states have already asked for a Level 2 grant, and that they have averaged a total of more than $130 million across all grants. She estimated that the total grants for Colorado will be about $100 million over 3 grants, and that this is the second of the three. The current grant proposal is the largest because of the IT expenditures. She compared the amount of Colorado's exchange grants with other states by population. She noted that this is not a padded budget and that they are asking for what they need to deliver the final product. She noted that there are temporary staff for implementation only. She then talked about the economic development impact of building the exchange and the number of jobs created, both at the exchange, the call center, and other vendors.

Mr. Ruiz-Moss talked about how the grant is necessary to meet the obligations of the exchange beginning in November, and that the grant funding will extend operations through the anticipated date of the next grant proposal. He talked about the potential market that is being served by the exchange and how there appears to be interest. He noted that under-building and under-serving would be a mistake, and they are aiming to be able to meet the needs of consumers.

Representative Gardner noted what would happen if the grant is not approved, and that presumably the exchange would cease to exist as we know it, with funds running out around November. He discussed the amount of the grant, $43 million, and said that the number seems large and that it is the role of the committee to review the numbers, and see if there were some areas that could be trimmed, but it would likely be at the margins. Representative Gardner stated that the question can be boiled down to: should the exchange continue as it is.

Ms. Hammer noted that the exchange has obligations and contracts and that those must be managed and examined when the committee considers the grant proposal. Ms. Fontneau stated that if there is not the will to build a state exchange, the federal government will build the exchange.

Senator Lundberg noted that the exchange wants more than $100 million in total grant funding and that it reminds him of CBMS. He stated that CBMS has now spent more than a quarter of a billion dollars and he is concerned about the implementation of the exchange and thinks the committee should consider what the best path really is.

Representative Kerr noted that it is a complicated issue, because if state does not pursue its own exchange, the federal government will put one in place, which will lead to a single payer system. He wants to know how to guarantee that the exchange promotes choice and benefits to the people. Ms. Hammer discussed progress and public input on how to improve the insurance purchase process.

Representative Gardner noted that the Colorado exchange is different than in the exchanges other states. Ms. Hammer discussed the open marketplace model and the active purchaser model. She talked about the insurance carriers that would participate in the exchange and how the open model could lead to more participants.

Representative Kerr asked if the exchange will be a mega-broker and whether small businesses will have the choice to go to their own brokers. Ms. Fontneau said no decisions have been made, but that she wants to bring brokers to the table and keep brokers as a distribution channel. She explained that some channels will be direct, and that other will be through brokers.

Senator Aguilar stated that doing nothing is not an option given the number of uninsured persons and the rising cost of health care.

Mr. Ruiz-Moss talked about loss of control under a federally run exchange.

Senator Lundberg stated that the federal government is forcing the state to build an exchange and it is the result of federal policy. Senator Lundberg talked about lack of detail and answers to key questions.

Representative McCann asked about eligibility determination and appeals processes. Ms. Fontneau answered that the appeals process is about decisions by the exchange and it is not the same as the Medicaid appeals process. Representative McCann talked about determination of subsidies and Medicaid eligibility and how the process would work. Ms. Hammer stated that they need to run test cases, but that they have determined guiding principles for appeals. One principle is that people should be referred to the appropriate place to receive help as soon as possible, and that their goal is to make the technology achieve that.

Representative McCann further inquired about how eligibility for subsidies can be appealed. Ms. Fontneau said that they expect the exchange to be the first line of dispute resolution but that ultimately it may be referred to the federal government. Ms. Hammer noted their concerns about ensuring due process and meeting the legal requirements. Representative McCann then asked about SHOP exchange reporting to the IRS for tax administration purposes. Ms. Fontneau stated that the reporting was in regards to the premium subsidy.

11:35 AM

The committee continued its discussion and questions about the grant proposal.

Representative Kerr asked about costs for actuarial support and market analysis in the grant. Ms. Fontneau discussed the impact on premiums from giving choice in policies on the SHOP exchange. She discussed adverse selection and the need to set premiums in a way to avoid adverse selection. She discussed the board's desire to do actuarial studies to evaluate this issue and included more funding in this area to make sure these analysis can be done.

Senator Roberts discussed the idea of cost savings and what that really means. She discussed brokers' and employers' incentives to provide health insurance coverage. She asked if there were other cost savings beyond reduction in the number of uninsured, and where the return on the investment in the exchange will be. Ms. Fontneau discussed brokers and how the advisory groups are reviewing the issue, and that there is unanimous support for including brokers in the process. She then discussed the value brought by the exchange, including administrative savings for employers, and the benefits of a competitive market. Ms. Hammer said that it is important to note that there are tax credits for both the individual and small group market. She said that the availability of insurance and subsidies will also help families, and that the individual exchange will allow for purchase of better insurance for persons who are underinsured. She noted that the availability of insurance will promote preventative care.

Representative Gardner discussed the role of brokers. He discussed the inclusion of grant proposal language stating that brokers will be a robust part of the system. Ms. Hammer noted that policy questions on brokers will be discussed at the August 27 board meeting. Representative Gardner noted that brokers are an important part of the system and that he wants to give that group a level of comfort going forward. Ms. Fontneau discussed current work by staff to design broker tools in the system.

Senator Roberts asked about the expansion of Medicaid under the Patient Protection and Affordable Care Act (PPACA) and how it may give the public the perception that they may become eligible eventually, which would prevent people from signing up on the exchange. She also asked about the optional nature of the Medicaid expansion and how that will affect the viability of the exchange. Ms. Hammer said that the board has not discussed that issue. She noted that their target population is persons above the Medicaid eligibility line. Ms. Fontneau discussed their target population and strategies.

Senator Roberts discussed uncertainty about Medicaid eligibility and wonders how that affects the exchange, and expressed concern that the exchange is not considering this issue. She wanted to know how they are making the business case for the exchange. Mr. Ruiz-Moss noted that they are building the exchange to accommodate the Medicaid expansion, but that if expansion did not occur, it could actually push more people to the individual market and to the exchange. Ms. Fontneau estimates that the population served will be about 1.0 to 1.2 million, not accounting for employees of small business in the SHOP exchange, which will be implemented later. She noted that the Medicaid expansion piece that covers persons with incomes from 100 to 133 percent of the federal poverty level is a small piece of the overall population. Senator Roberts expressed budget concerns. Ms. Hammer agreed with the need to look at the issue and plan for various scenarios. She also noted the inclusion of funding for a broker coordinator in the grant.

12:07 PM -- Public Comment

Representative Gardner thanked the witnesses from the COHBE and opened the floor for public comment.

Ms. Marleen Fish, representing the National Alliance on Mental Illness, supported the inclusion of mental health services in the essential health benefits. She noted that state and federal law require six major categories of mental illness to be treated the same as physical illnesses, and wanted to make sure that these were covered.

Representative Gardner closed public testimony.

12:11 PM -- Comments from Committee Members

Senator Roberts said that she and one other member will not be available for the August 13 meeting because of a conflict with the Lower North Fork Wildfire Commission.

Senator Boyd noted that the committee was not going to vote today, but that she appreciated the thoughtful questions and comments and that she hopes the proposal is allowed to move forward.

Senator Nicholson, also noted that she will not be available on August 13 because of the wildfire commission, but also stressed the need to move the proposal forward and noted that the meeting will not be needed if the chair and vice chair approve the grant proposal.

Representative McCann commented on communications and marketing staff positions in the proposal and stated that they are very important for raising awareness, especially among small business owners.

Representative Gardner stated that the grant proposal must be approved if the exchange is to continue as we know it, but that the question is a policy issue to be considered. He noted that other states have rejected the creation of an exchange, but other like Colorado have created exchanges to maximize local control. He encouraged members to contact the chair and vice-chair to discuss the proposal and share any specific concerns. Representative Gardner reiterated his concern about brokers. Representative Gardner discussed input from stakeholders who supported Senate Bill 11-200, and talked about the choices to be made. He talked about shaping the exchange to reflect stakeholders and interests, and discussed the choices between a perfect exchange and no exchange. Representative Gardner discussed the possibility of the next meeting on August 13 and said that a decision will likely be made in the middle of next week.

Representative Gardner adjourned the meeting.