FACE THE STATE
A 2007 state law is being blamed for dramatically higher health insurance rates for small businesses, but lawmakers and regulators say the bill isn’t the only factor driving higher costs. The bill’s sponsors say premiums are increasing with inflation and compounded by the down economy, with the bill as a convenient scapegoat.
House Bill 1335 was signed into law in 2007 but did not take effect until January 1 of this year. The law removes health status and claims experience from the list of criteria insurance companies may consider in writing policies for small businesses with between 2 and 50 employees. It encourages the use of a “standard industrial classification code” tied to business activities instead. As a consequence, workers in some professions are assessed higher premiums, even if they are otherwise healthy and take steps to reduce their health risks.
The Montessori School of Denver, an alternative primary school, has 12 full time employees and a total payroll of 47. The school has experienced rate hikes as high as 35 percent this year for some employees. Before the passage of HB 1355, the school was extended a “wellness discount” for healthy employees, which has since been revoked. Its rates are now evaluated on the basis of the industry code for educational institutions.
“What worries me as an employer of many young people is that these kids, coming out of college, have debt and student loans and we’re asking them to save for their retirement, pay their bills and skyrocketing health insurance costs,” said Ann Poundstone, the school’s business manager. “For just one employee, our cost went up almost $49 a month. For a family, it has increased over $160 a month.”
One of the bill’s sponsors, state Sen. Morgan Carroll, D-Aurora, says the insurance industry is blaming the new law for premium increases actually imposed for other reasons.
“While some premiums went up for some companies HB 1355 is not why they went up,” Carroll told Face the State in an e-mail (her emphasis). “The industry had other rate increases in cue for other reasons and given their loathing of the initial bill this became a great redirect to angry customers who wanted to know why their premiums were going up.”
The Colorado Chapter of the National Federation for Independent Business testified in support of the bill in 2007. Director Tony Gagliardi says the bill is still good for business.
“Our membership, by over 67 percent, had voted that claim history and health status should not be used to rate small groups policy because the pools are too small to do that,” said Gagliardi. “Health status should never have been there in the first place. One catastrophic illness or sick dependent and the premium would be raised too high for other members of the group to afford it.”
The division of insurance at the state Department of Regulatory Agencies is tracking the impact of HB 1355. Current trends for premium inflation from insurance providers measures roughly 12 percent. Over 56 percent of small group premiums have increased less than 20 percent since 2007, with another 25 percent of businesses seeing an increase between 20 and 40 percent.
“I will not defend [HB 1355] and say it should not have raised rates,” said insurance commissioner Marcy Morrison. “Because 1355 is including sick people in a small group and it was getting rid of some of these opportunities for discounts the premiums rose. But you have to remember that for everything in the health environment there has been an inflation factor of about 10 percent and they are predicting another 10 percent on top of that.”
Morrison added that for small groups seeing increased premiums over the trend of 12 percent, it is likely a combination of HB 1355 rating changes, natural inflation and the recession.
Dorothy Marshall of the Colorado State Association of Health Underwriters blames the bill almost entirely for the premium increases, saying the removal of health status and claim history from the list of criteria is costing small business.
“The Division [of Insurance] is so wrong,” said Marshall. “The people [who had] the discounts are now getting up to 47 percent rate increases. How do you explain 47 percent if the trend is 12 percent?”
While health status discounts and wellness credits were eliminated with HB 1355, a new law passed this session, HB 1012 is an attempt to reinstate some of those incentives to businesses and insurance providers. By allowing providers to offer incentives for healthy employees, Morrison says premiums may temper for small groups that had lost similar credits.
Marshall says HB 1012 is too little, too late.
“We don’t know if the carriers will bite on [HB 1012] because there are no regulations tied to it,” said Marshall. “Now, the carriers are once burned, twice shy.”
Distributed by Colorado Capitol Reporters
