Issue Backgrounder

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Senate Bill 11-200 the Colorado health Benefit exChange

IB-2011-A March 2011 | By Linda Gorman, Health Care Policy Center Director
The federal Patient Protection and Affordable Care Act of 2010 (ObamaCare) encourages each state to set up an American Health Benefits Exchange. States received $1 million federal grants to work on exchange development. The exchanges will broker individual and small group plans offered by insurers and health benefit plans. They do not buy or develop health insurance and must be self-supporting by January 1, 2015. The law says that exchanges may become self-supporting by charging assessments or user fees to participating health insurance issuers, or to otherwise generate funding, to support its operations. The model, The model, and and the only operating exchange of the only operatany significant size, is the Massachusetts ing exchange Connector Authority, which cost $30 of any signifimillion to operate in 2009. cant size, is the Massachusetts By January 1, 2013, the Secretary Connector of Health and Human Services must Authority, which determine whether a state will have an cost $30 million operational exchange by January 1, 2014. to operate in If a state exchange will not be operational, 2009. the federal government will operate its own exchange in that state either directly or through agreement with a not-forprofit entity. Federal law specifically says that the operation of a federal exchange has no effect on state regulatory authority or law. A states ability to tailor exchange products to its needs is limited. State exchanges must comply with detailed federal regulations. Only qualified health plans, as defined by the new law, may be offered, and exchanges must meet specific reporting, structural, and contracting requirements,

Bill Context:

produce required ratings, and provide internet and telephone access. The Secretary of Health and Human Services has yet to issue either regulations giving specific standards for state exchanges or a model to provide guidance. Several governors have determined that their citizens will be better off without a state exchange.

doeS: Creates the Colorado Health Benefit Exchange. A non-profit, unincorporated entity, it is governed by a 12-member Board. Its expenses will be funded by grant monies received by the board. Using general fund money to fund Exchange activities is prohibited. The Exchanges debts and liabilities do not constitute debts and liabilities of the state, and neither the exchange nor the Board is an agency of the state. The Exchange will not solicit bids or actively purchase insurance. It is not required to deposit its funds in Colorado banks.

What SB11-200

Several governors have determined that their citizens will be better off without a state exchange.

Board members are political appointees. Three members, the Executive Director of the Department of Health Care Policy and Financing, the Commissioner of Insurance, and the Director of the Office of Economic Development and International Trade are non-voting. The 9 voting members should have demonstrated expertise in at least one of 11 different areas including the purchase of health insurance coverage, information technology, starting a small business, and administration of a public or private health care delivery system. No marketing or brokerage skills are required. Board members may not be affiliated with the insurance industry or be state employees.

The Board will create an operational plan, apply for grants and donations, and establish technical and advisory groups as needed. It must submit an annual written report. It may share information with other entities. Members of the general assembly appointed to a review committee will supervise the board. The committee may submit up to five legislative bills each year that are exempt from the bill limit. The federal government is willing to open an Exchange in Colorado at no cost to state taxpayers. If the federal exchange is a failure, the state could presumably create an exchange to replace it. Instead, this bill proposes to ...this bill procreate an unaccountable bureaucracy that poses to create an will undoubtedly support itself by levying unaccountable new fees/taxes on the purchase or sale bureaucracy that of health coverage. It would continue to will undoubtedly operate even if the federal health care law support itself by motivating it is repealed. levying new fees/ taxes on the purThe Exchange Board is exempt from both chase or sale of normal budgeting review and TABOR. It is health coverage. not required to submit audited statements It would continue to the legislature. It is exempt from the to operate even if Colorado Open Records Act. Though the the federal health bill specifies a 5-year review of Exchange care law motivateffectiveness, it makes no provision for ing it is repealed. hiring a firm competent to do in-depth cost-benefit analysis. The Exchange could have been a state agency. Instead, it is likely to be run by rent-seeking businesses and non-profits. Health plans have already managed to exclude insurers from Board membership. Excluding state employees is relatively ineffective when Board members may work for non-profits entirely dependent on tax revenues. The bill does not specify whether participation in the Exchange is voluntary. The Board could therefore support legislation compelling exchange membership, and payment of its fees/taxes on health insurance. As ObamaCare mandates the purchase of health insurance, the bill allows the Exchange Board to create a monopoly insurance broker with unlimited taxing power. While the bill says that all carriers authorized to conduct business in the state may be eligible to participate in the exchange, it does not say that they shall be eligible. Self-interested members of the Board could also harm competitors with regulations

and risk adjustment mechanisms designed to hamper their business or keep them out of the Exchange. Those touting exchanges as a solution to the problem of costly health insurance often cite the Utah exchange as a model. They claim that in less than two years it has grown into a free-market solution for small businesses wanting to provide health insurance to their employees [with] 69 small groups covering 2000 lives. Utah has roughly 200,000 businesses and a privately insured population of almost 2 million. The fact that it provides coverage of 2,000 lives is about as impressive as the success of the ObamaCare pre-existing condition pools. They were projected to cover 375,000 people. They actually cover just 12,500 people. Like ObamaCare pre-existing condition insurance, state exchanges are solutions in search of a problem. Like ObamaCare pre-existing condition insurance, state exchanges are solutions in search of a problem.

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