The health insurance system works best when as many people as possible (preferrably all people) are covered. In a free market system, legislating the insurers is a delicate balancing act. On the one hand, we need to keep them from trying to only insure healthy people and excluding those with health conditions. But on the other hand, we need to keep the market as attractive as possible to healthy people and give everybody an incentive to stay as healthy as possible.
Colorado has recently improved its situation by allowing “rating flexibility” to group insurers. After a drop of 24,000 employers in Colorado offering health insurance from 2000-2005, rating flexibility sparked an increase of 1,289 more Colorado businesses providing coverage to their employees and their dependents between 2005 and 2006.
“Community rating” was the old system in Colorado that required insurers to charge the same rate to a 40 year old, non-smoker, that eats healthy and exercises as they charge a 40 year old smoker with type-2 diabetes, high-blood pressure, and high cholesterol. Right now, however, there is talk at the Colorado Capitol building of getting rid of rating flexibility and going back to community rating.
Although community rating is very well intentioned, as it keeps prices lower for people with health conditions, it makes the price even less attractive for healthy people. This type of policy will keep that many more healthy people, who pay into the system but don’t take much back out, out of the Colorado group health insurance economy.
Update: This bill is called Colorado HB1355 and is scheduled to go to the Colorado Senate for vote as early as the week of Monday, April 9, 2007.
Update (4/17/2007): On April 13, the Colorado House approved changes (HB 1355) to Colorado’s small group rate requirements — but by a much closer margin than expected. On Monday, April 16, HB 1355 moved to the Senate for committee consideration.
If HB 1355 passes, average rates for small businesses and their employees in Colorado will increase:
- Supporters of the bill believe rates for some small employers are too high.
- If enacted, these changes would abolish Colorado’s existing small group rate law (passed in 2003).
- However, based on rate experience before the 2003 law was enacted, this proposed “fix” would raise the average rate for all small employers — and significantly increase rates for many small employers.
The committee could vote on this proposal as early as this week. Today, please ask your Senator to urge the following State Affairs Committee members to oppose the small group rating provisions in Colorado HB 1355:
- Sen. Peter Groff (D-33)
- Sen. Ron May (R-10)
- Sen. Chris Romer (D-32)
- Sen. David Schultheis (R-9)
- Sen. Sue Windels (D-19)
Update 4/26/2007: Health insurance Bill 1355 passes senate.