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Posted: March 01, 2012

Power of the pool

Colorado Health Benefit Exchange is designed to increase insurance options for small businesses

Debra Melani

Richard Betts has witnessed the strain of the health-care crisis from all sides. As CEO of an 18-employee company, Betts knows the struggle of insuring workers amid ever-increasing premium hikes. And with 6,000 clients across the state using his accounting and payroll services, he sees fellow small-business owners battling with the issue every day, a battle that many lose.

"I got involved because we have to solve this problem," said Betts, vice chair of the Colorado Health Benefit Exchange Board of Directors. "Small employers are increasingly not providing health insurance," Betts said, noting that employee contributions more than doubled in the past decade, from $4,200 to $9,700 a year, while employer contributions tripled.

So he and his colleagues have rolled up their sleeves and set to work on a state insurance exchange, on track to launch in October 2013. Although there are some detractors and a few political minefields in their way, they say they have strong bipartisan support in this step toward switching the track on the runaway health-care train.

Taking it to the table

Colorado’s Health Benefit Exchange, created by Senate Bill 11-200 in June, is a virtual, one-stop-shopping market (with website and call center) aimed at providing a user-friendly option for individuals and business owners to compare and buy often-subsidized insurance plans. The exchange is tied to President Obama’s controversial Patient Protection and Affordable Care Act and expected to be funded through 2015 by federal grants, but Colorado has considered an exchange for years.

Although Tony Gagliardi, state director for the National Federation of Independent Business, questions some key aspects of the exchange, such as small-business tax credits and the individual mandate (which the NFIB has filed suit against the federal government over), he says the NFIB has been a longtime supporter of the exchange concept and remains one. The 7,500-member group voted for the exchange’s formation, banking on the increased competition and purchasing power by pooling small businesses to boost choices and lower costs.

Under the federal plan, some businesses with fewer than 25 employees that pay average annual wages below $50,000 and provide health insurance will — and already do — qualify for a small business tax credit of up to 35 percent (up to 25 percent for nonprofits) to offset the cost of insurance, said Denise (Dede) de Percin, executive director of the Colorado Consumer Health Initiative. This credit will increase in 2014 to 50 percent (35 percent for nonprofits).

"That’s a big chunk of change for a small-business owner," said de Percin, who received a check back for nearly $2,000 to help cover her employees’ insurance at her small nonprofit last year. The tax credit is already in effect, but many businesses are unaware of it and throwing money away, she said.

Gagliardi is not alone in questioning the value of the tax credit. "We insure about 17,000 people in Colorado and have yet to find one client that qualifies," said Steve Roper, president of Roper Insurance & Financial Services in Denver, who also questions how subsidies will be fiscally sustained. "We as a government are dead broke." But Gagliardi, who has been at the table representing small business since the initial planning stages, encourages people with concerns to join him, saying now is the time for state residents to make a difference.

"For instance, we recently made sure that if a company is working with a broker and wants to continue with that broker, that broker can work within the exchange," Gagliardi said. Gagliardi sits on the Data Advisory Work Group and the Small Employer Work Group. All board and committee meetings are open to the public and listed on the exchange website (www.getcoveredco.org).

Keeping an eye on the little guys

Other decisions affecting small businesses have been made during the grant-writing phase (the board is awaiting an $18 million grant to move forward). Some of those decisions:

• Initially, the business part of the Colorado exchange (the Small Employer Health Options Program, or SHOP) will cater to companies with fewer than 50 employees. "It’s supposed to be designed with the small-group market in mind," Gagliardi said, "and we didn’t want to disrupt that by saying, ‘Hey, if you have up to 100 employees, you can come into the exchange.’" Once shown effective, the exchange will open to those larger companies.

• There will be two separate marketplaces, an individual and a small-group, rather than one combined marketplace. The decision was made largely because the two markets are already separate in Colorado, and there were concerns about disrupting those markets, de Percin said. Still undecided: whether a business of one will be part of the individual or small-group market. "We like the idea of the small-group market because it has better protection with guaranteed issue and some mandatory coverage," de Percin said. But, under federal law, those protections extend to individuals by 2014 anyway, she said.

• A couple of decisions were aimed at attracting carriers to the exchange, critical for boosting competition and lowering premiums, Gagliardi said. Senate Bill 11-200 states that any carrier licensed to do business in Colorado can enter the exchange. The exchange board also has no authority to set rates or regulations, with that oversight left to the Division of Insurance. "That makes it easier for carriers coming into the market," Gagliardi said. "They know exactly what the rules are instead of setting up a whole new scheme of rules."

Although Roper predicts the increased cost to carriers having to redesign products to fit the exchange will discourage participation, organizers (with three major insurance carriers represented on the board) suspect insurance providers will want to capture some of the previously untapped market the exchanges are expected to attract. All participation in the exchange, from consumers to carriers, is voluntary.

Gagliardi also said the December decision to appoint Patty Fontneau, former chief operating officer for the international law firm of Holme Roberts & Owen LLP, to the top post was a victory for business. "She’s got great business sense, and she knows how to motivate the board," Gagliardi said of the executive director. With all of the work that lies ahead, and President Obama’s deadline for all state exchanges to be up and running by January 2014, motivation will be critical. By failing to meet the deadline, states open the door to a federally run exchange, something that most organizers are strongly against.

Staying focused amid political chaos

Looming deadlines are not the only political pressures exchange organizers are working under. Rep. Marsha Looper, R-Calhan, recently introduced a bill that would nullify the exchange, should the PPACA be repealed or any portion of it be ruled unconstitutional. Repeated attempts to contact Looper were unsuccessful, but many insiders say the bill is simply political posturing. "I think a lot of what’s going on there is not related to health policy," de Percin said. "It has to do with their primary race," de Percin said, referring to the contest between Looper and Amy Stephens, R-Monument, who supported the exchange bill.

Nonetheless, the board is well aware of the bill and plans to be vocal at the hearings, Fontneau said. She and Betts both declined to speculate on what-if’s, including the "what if" the U.S. Supreme Court does rule unconstitutional the PPACA’s "individual mandate," which requires all Americans have health insurance and can be a critical component of a health benefits exchange.

"We have not done financial modeling on what would happen if the individual mandate goes away," Fontneau said. "There’s just too much we have to accomplish right now to move forward. We’ll have to evaluate and make that decision at that point and time." The high court is set to hear the case in late March.

Fontneau and Betts say they and their colleagues are charged with the challenging job of building a competitive marketplace that will succeed for Colorado, regardless of the future federal landscape, and that is their focus. As dictated by the state bill, the exchange must be self-sustaining when federal dollars run out in January 2015. "No state money can be used," Fontneau said. Based on initial modeling, she said she is confident that can be achieved. For now, the board must forget the political uncertainties and remain focused, Betts said. "They know on both sides of the aisle that we cannot sustain this ever-spiraling cost of health care," he said. "Our focus has to be on moving forward."

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