Colorado House Bill 1355 (in reference to small groups between 2 and 50 employees) was passed by the senate today including an amendment that would have the change slowly brought in over the course of two years. So it will go back to the House for consideration of this (and other) amendments.
HB1355 is a very well intentioned bill. In a quick and easy attempt to fix problems like Nathan Wilkes’, legislators want to prohibit insurance companies from looking at a clients medical history. So in the case of Nathan, the insurance company wouldn’t be allowed to give the maximum possible rate increase of 10% to the whole group for a pre-existing condition of a member in the group. Simple right?
Currently, almost 2/3 of all Colorado small businesses are receiving a discount (up to 25%) on their premiums because of the overall good health of the employees. When “community rating” was first introduced, the Colorado small group market saw a drop of 24,000 employers offering health insurance between 2000 and 2005. Then, when “rating flexibility” was passed, Colorado saw on increase of 1,289 employers offering health insurance to their employees between 2005 and 2006.
To have a healthy small group insurance market, we need to have as many groups as possible to spread out the risk. Once HB1355 is reinstated and community rating goes back into force, insurance companies will need to stop offering discounts to healthy groups and raise rates for everybody to offset the lower rates for the unhealthy groups. You’ll see a drop in the number of employers offering health insurance, and the death spiral will set in on the unhealthy groups. They’ll likely end up with rates just as high, or higher, than they were paying with rating flexibility.
I was at a meeting with Humana today and I asked them what the passage of HB1355 would do to their presence in the small group market – and if that would affect their presence in the individual/family market. (Humana re-entered the Colorado small group and individual market when community rating was brought back) They were positive, saying they have a strong presence now and hopefully they wouldn’t be affected. But HB1355 is likely going to make the Colorado group health insurance market unattractive to insurers and we’re going to lose quite a few of the insurers currently offering coverage in the state.
