In an effort to try and stop a massive exodus of individuals from the private insurance market, Colorado legislators are looking again at raising fees on all health-insurance policies in order to subsidize the premiums of state residents who face the highest costs.
Rep. Kyle Brown, D-Louisville, said Friday that he is considering bringing a bill during the upcoming special session that would allow the Health Insurance Affordability Enterprise to raise fees on all plans sold in the state by as much as 0.75%. The bill also would seek to impose a new $3 per-member-per-month fee on all stop-loss insurance policies that are purchased by self-insured employers to guard against catastrophic claims.
The two fees could together raise about $100 million for the HIAE, which oversees the reinsurance and OmniSalud programs and offers subsidies that lower the costs of individuals buying policies through the state’s health-insurance exchange, Brown said. The HIAE now charges fees of 1.15% of every health-insurance premium sold in the state by a nonprofit insurer and 2.1% of every premium sold by a for-profit company.
During the regular legislative session this year, House Bill 1297, which would have allowed the HIAE board to increase fees by as much as 1%, died. Legislators from both parties worried at the time that such an increase in costs paid by Coloradans could exacerbate the rising cost of living statewide.
Could changing conditions lead to change in fortunes for fees idea?
However, just two months later in July, President Donald Trump signed the “One Big Beautiful Bill” that reduced subsidies going to lower-income buyers on the individual insurance market and failed to extend tax credits for all individual buyers. State insurers submitted individual-market plans with average premium increases of 28% for next year, and Colorado Insurance Commissioner Michael Conway estimated that the end of enhanced premium tax credits could lead to some consumers paying twice as much in 2025 as they did in 2026.
The combination of those subsidy reductions led Conway to estimate as well that 110,000 Coloradans will choose to disenroll from the individual market rather than pay the higher costs, leaving them uninsured and vulnerable to huge medical bills. And that led Brown, a primary cosponsor of HB 1297, to decide to take another swing at boosting the HIAE — with a new way of funding the enterprise.
“We’re trying to figure out ways to raise additional revenue, lower the fee on any individual payer and broaden the base so everyone is in this together,” Brown told The Sum & Substance in an interview. “(The) 28% (increase) is ridiculous. People, families, working families cannot afford that.”
Why the fees idea resounds with proponents
The effort is paradoxical in some ways, as it seeks to address the rising cost of health insurance by adding a fee on insurers that will be passed along to purchasers, resulting in them paying more than they otherwise would. But Brown and other proponents say that by asking everyone to give a little bit more, they can keep people insured — about 20,000 individuals who otherwise would choose to disenroll, he estimated — by helping to offset the highest increases Coloradans are expected to face.
The HIAE funds three programs with its existing fees, which bring in about $119 million annually. Most of the money goes to a reinsurance program that creates a pool of funds for insurers to dip into to pay the highest-cost individual claims — a backstop that allows 20% premium decreases in the highest-cost areas of the state, like the Western Slope and mountain communities.
It also funds the OmniSalud program that offers insurance plans to 12,000 undocumented immigrants who otherwise could not get them, and it funds subsidies that help to lower the cost of premiums for people buying individual insurance through the state exchange. Brown’s bill would put about $50 million toward the reinsurance program, which would cut premium discounts to 12% without the effort, and $50 million toward insurance subsidies, leaving OmniSalud with funding cuts that will reduce its membership to 2,700 people.
Insurers raising questions about proposal
Some insurers, which Brown and other sponsors briefed on the bill this week, are eying the plan skeptically, fearful that its efforts to raise money for one pocket of individuals will put an increasing financial burden on a wider group of people to pay for it. And they question why people who won’t benefit from the subsidies — such as those covered by self-insured policies — are being asked to float the bill for others.
Employers — typically those operating larger companies — as well as local governments and unions often self-insure because they find it more economical than buying group plans and have more control over their benefit structures. Most of them also buy stop-loss policies from insurers that cover the most catastrophic claims that could financially burden a self-insured entity.
Adding an annual cost of $36 to each worker or family member covered under a stop-loss policy may not seem back-breaking, but that bill can add up quickly for organizations that are insuring thousands or tens of thousands of lives, said Jacob Wager, senior director of state government affairs for Cigna Healthcare. And those increasing costs could lead some organizations to decrease benefits to offset them, particularly at a time when businesses are struggling with the rising costs of goods and other expenses.
Could fees exacerbate lack of affordability?
Meanwhile, the 0.75% fee increase for all plans — both individual and employer-sponsored — will add onto the existing rising premium costs and add another burden for Coloradans, Wager added. Legislators, then, must consider whether efforts to increase aid and keep some Coloradans from dropping health-insurance coverage will be the final straw that could push other residents or small businesses to decide they’ve had enough and won’t pay anymore for insurance.
And all this is being discussed, Wager added, at the same time that Gov. Jared Polis has directed legislators to consider reducing the tax benefits for some insurers that have a regional office in this state — a change that also will lead to higher premiums.
“There is some offset there. When you are increasing costs on others — whether that be small businesses, larger businesses or individuals — there is some sort of cost impact to them as well,” he said. “That is the million-dollar question: How much impact does something like this have on other markets?”
“Orders of magnitude in difference”
Brown pushed back by arguing that the increased costs to people across the board are far lower than they could be to individual-market buyers if they are not able to get the benefits of exchange subsidies or of the reinsurance programs. He also said that the more that hospitals must treat newly uninsured patients who can’t pay their bills, the more they will increase costs for their services to people who are insured, which could result in higher costs and premiums for those who get policies through their employers.
“The increases that people are facing on the individual market are more than $10,000 in many cases over the course of the year, while the fee on stop-loss policies is 36 dollars a year,” he said. “Those are orders of magnitude in difference.”
Brown also added that it’s possible he could introduce a bill that does not involve fee increases if other revenue-raising options present themselves. And the bill would not take effect, he added, if Congress reverses course and decides before the end of this year to extend the enhanced premium tax credits. But the two proposed fee increases have been the focus of his conversations with stakeholders this week.
Other ideas being suggested
In addition to concerns about the increased cost to individuals that fee hikes would bring, some outside groups have said there is a need for greater transparency in how the HIAE funding is used, as well as a need for an audit of the enterprise.
Some legislators also have suggested that funding could come from the same source that was tapped this past session to fund Senate Bill 290, which creates a new pool of money for safety-net clinics statewide that are seeing an influx of uninsured patients. That money came from a loan from the Unclaimed Property Trust Fund, where the state keeps property and money that belongs to residents but remains unclaimed.
The special session is scheduled to begin on Thursday and run for at least three days, though many observers believe this session is likely to go for at least a week.