When Colorado HB1355 became law, we noted that for our own small group clients, it would almost universally increase premiums. The new law eliminated the practice of setting small group premiums based on the overall health of a group (previously, groups could get a discount up to 25%, or a rate increase of up to 10%, compared with base rates). HB1355 took effect for policies starting or renewing on or after January 1 2009, but businesses were able to keep their discount for part of this year if their policy renewed before the end of the year last year. Last fall, Anthem Blue Cross Blue Shield allowed small businesses to move up their renewal dates in order to keep their discounts for another year, which most of our Anthem clients opted to do. But now those plans are up for renewal again, and there is no way to avoid the premium increases for groups of generally healthy employees.
Insurance carriers in Colorado were strongly opposed to HB1355. The majority of small businesses in Colorado were receiving a discount on premiums based on health status, which HB1355 forbids. Insurers knew that businesses that were already struggling to pay premiums at a reduced rate might decide to forgo health insurance for their employees after the discount was eliminated. This is especially true for the most healthy groups, whose members can find health insurance within the medically underwritten (and less expensive) individual market. Of course the removal of healthy groups from the pool of insureds only serves to drive premiums even higher for the sicker groups who remain insured under the group plans. It’s true that groups can no longer be rated higher than the base rate because of the specific health of the group, but the base rate can – and likely will – continue to rise.
Critics are questioning why insurers keep bringing up HB1355, as the trend in national health care reform these days is towards guaranteed issue health insurance without underwriting – which is what HB 1355 was all about. But while HB1355 was beneficial to groups with unhealthy members, the majority of small groups in Colorado had a discount before HB1355 took effect. And if those groups are unable to afford their new, higher rates, they can opt to cancel their coverage – which leads to higher prices for groups that remain covered. On a national level, as far as individual health insurance is concerned, HB1355 should be considered a warning sign. Getting rid of medical underwriting is the right, and fair, thing to do. But not if people can come and go as they please in the insurance system. We’ve seen what the impact will be on premiums if guaranteed issue coverage takes effect without a strong mandate requiring people to carry health insurance. I think this is why insurers are still bringing up HB1355. It’s impacting all small groups in Colorado now – there’s no more putting it off. And significant rate hikes for healthy groups should serve as a warning for what we’ll likely see in the individual market if reform passes without a way to make sure that everyone is part of the insurance pool.
