Back in 2003, Colorado’s health insurers fooled naive state legislators into enacting a bill that ended community rating of health insurance risks for small employers. They said rate increases would slow. They soared.

Insurance brokers and insurers are trying to roll back the reinstatement of modified community rating, which cuts their commissions and profits. Insurers want premiums to rise because they get their 4% take regardless. And apparently brokers and agents make more money when there is medical risk rating instead of community rating. It’s obvious that this isn’t about those who pay the premiums.

One of the smartest, most pro-small business moves that Governor Bill Ritter and Democrats in the General Assembly have done was the enactment of House Bill 1355. It reinstates community rating, which makes health insurance less expensive for small businesses that have older and sicker employees while increasing costs for those that have younger, healthier employees. Most small businesses are owned by people over 40, and most have older, less healthy workers. Or, as anyone who’s been in business knows, an employee can have an accident or get cancer tomorrow. And when that happens, you’re no longer a healthy employer.

Under today’s community rating system, your rates won’t go up because an employee or family member suddenly begins filing financially catastrophic claims on an insurer. Both for-profit and not-for-profit insurers want to be able to screw their consumers with medical risk rating of small groups. Even though most of the insurers’ customers in the state are small employers and their employees, insurers want to be able to take them to the cleaners.

At this point, the Democrats are the pro small business party in Colorado because they support community rating. Republicans killed modified community rating in 2003 when it passed HB03-1164, and the GOP was the anti-small business party until several Republicans supported HB 1355.

Now, Colorado’s health insurers are trying to mislead small employers and legislators again. I hope that Ritter and the GOP’s gubernatorial candidates, Scott McInnis, Josh Penry and Dan Maes, don’t take the bait.

Impact graphs and links back to 2003 on this issue:

Frokm The Denver Business Journal:

Still, a survey conducted of clients of Lockton Benefit Group shows premiums in the small group (covering employers with two to 50 workers) aren’t going up nearly much as they have in recent years, nor are they as extensive as many local insurance experts feared.

The survey shows that on average, premiums for health insurance policies covering employers with 50 or fewer workers will increase by 8.2 percent in 2010 after employers make changes in their plans, such as raising deductible levels or cutting benefits. Employers that don’t negotiate changes on insurance plans will pay on average 14.3 percent more than they did in 2009, the survey said.

Bill Lindsay, president of Lockton, said Lockton’s survey is intended as a snapshot and a preview of what businesses can expect in the year ahead, and that it’s not intended to be comprehensive or statistically valid. He added that premiums in the small group market have leveled off in part because the popularity of high-deductible plans is alleviating pressure on insurance carriers.

Lindsay said brokers who claim small-group premiums are skyrocketing because of HB 1355 are relying largely on “anecdotal evidence” in an effort to roll back the law. He added that insurers and underwriters already are lobbying for legislation to overturn or revise HB 1355 in the next session of the Colorado Legislature.

“Frankly, a lot of brokers have political bias against [HB] 1355, and they’re not being objective,” Lindsay said. He said that while many of Lockton’s small-group clients are experiencing substantial premium hikes, huge rate hikes aren’t the norm.

From the Denver Post:

Health-insurance companies are blaming significant rate increases this fall on a 2-year-old state law that prohibits them from charging small businesses more for having unhealthy workers.

Some insurers are panning House Bill 1355, which most of them fiercely lobbied against in 2007, in recent letters to small-business owners.

Anthem Blue Cross Blue Shield of Colorado officials say they included the letter ‚Äî which points the finger at Gov. Bill Ritter in the first sentence ‚Äî in customers’ renewal packages to defend themselves against the assumption that insurance companies are raising rates to boost profit margins.

Kaiser Permanente and UnitedHealthcare also mentioned the law in letters to small-business customers.

“This was not at all intended to be a political statement or endorsement or lack of endorsement of anyone in public office or running for public office,” said Rebecca Weiss, Anthem’s director of government affairs.

But the letter exacerbates the tension between the insurance industry and the governor, who has blasted insurance companies as the country debates health care reform.

It’s unfair to pin high rate increases on the new law, particularly since medical costs have been climbing year after year, Ritter spokesman Evan Dreyer said.

HB 1355, which had bipartisan support, protects small businesses when one employee has a serious health problem such as cancer or a premature baby.

“The business, the employee and co-workers should not have to worry about being one serious illness away from the entire company being priced out of insurance,” Dreyer said. “No Coloradan should be denied coverage or charged differential premiums because of their health status or family history.”

Links

Health insurance hikes blamed on HB 1355. By Bob Mook.

Health insurers blame rate increases on 2-year-old Colo. law. By Jennifer Brown

Colorado’s HB 1355 returns state to modified community rating on health insurance. The Business Word.

How to reform health insurance markets. The Business Word.

U.S. needs community rates for health risks. By Donald E. L. Johnson

Risk rating leaves people without health insurance; shows need for community rating. The Business Word.

Colorado general assembly passes rate banding bill; strips mandated benefits. The Business Word.

Mark Hillman bill rigs market for Anthem Blue Cross. The Business Word.

Mandated health benefits in Colorado increase the cost of health insurance up to 50%. The Business Word.