Improving Colorado’s Health Insurance Market

The health insurance system works best when as many people as possible (preferrably all people) are covered. In a free market system, legislating the insurers is a delicate balancing act. On the one hand, we need to keep them from trying to only insure healthy people and excluding those with health conditions. But on the other hand, we need to keep the market as attractive as possible to healthy people and give everybody an incentive to stay as healthy as possible.

Colorado has recently improved its situation by allowing “rating flexibility” to group insurers. After a drop of 24,000 employers in Colorado offering health insurance from 2000-2005, rating flexibility sparked an increase of 1,289 more Colorado businesses providing coverage to their employees and their dependents between 2005 and 2006.

“Community rating” was the old system in Colorado that required insurers to charge the same rate to a 40 year old, non-smoker, that eats healthy and exercises as they charge a 40 year old smoker with type-2 diabetes, high-blood pressure, and high cholesterol. Right now, however, there is talk at the Colorado Capitol building of getting rid of rating flexibility and going back to community rating.

Although community rating is very well intentioned, as it keeps prices lower for people with health conditions, it makes the price even less attractive for healthy people. This type of policy will keep that many more healthy people, who pay into the system but don’t take much back out, out of the Colorado group health insurance economy.

Update: This bill is called Colorado HB1355 and is scheduled to go to the Colorado Senate for vote as early as the week of Monday, April 9, 2007.

Update (4/17/2007): On April 13, the Colorado House approved changes (HB 1355) to Colorado’s small group rate requirements — but by a much closer margin than expected. On Monday, April 16, HB 1355 moved to the Senate for committee consideration.

If HB 1355 passes, average rates for small businesses and their employees in Colorado will increase:

  • Supporters of the bill believe rates for some small employers are too high.
  • If enacted, these changes would abolish Colorado’s existing small group rate law (passed in 2003).
  • However, based on rate experience before the 2003 law was enacted, this proposed “fix” would raise the average rate for all small employers — and significantly increase rates for many small employers.

The committee could vote on this proposal as early as this week. Today, please ask your Senator to urge the following State Affairs Committee members to oppose the small group rating provisions in Colorado HB 1355:

  • Sen. Peter Groff (D-33)
  • Sen. Ron May (R-10)
  • Sen. Chris Romer (D-32)
  • Sen. David Schultheis (R-9)
  • Sen. Sue Windels (D-19)

Update 4/26/2007: Health insurance Bill 1355 passes senate.

About Jay Norris

Jay operates a health insurance brokerage in Colorado, where he helps individuals and small groups obtain and maintain health insurance coverage.
Complimenting his work as a health insurance broker, Jay also provides data analysis and creates visualizations that are easily understood by consumers and other stakeholders in Colorado’s health insurance market.


  1. As a small group health insurance broker, I am already planning ahead for a serious loss of business now that HB 1355 is playing out in our Colorado market. I’m the bearer of bad news to small businesses in our state. Even with up to a 25% discount, small businesses were struggling with the premiums. But at least renewals got easier and employers did not have to shop around each year and put their employees through carrier changes. The discounts and 10% load were calculated per small group and most of the employers I serve understood and accepted their renewals. It taught them about risk. But now with HB 1355 in effect, the employers will not be able to afford to offer benefits anymore. It will be what breaks the camels back. Employees will shop for individual insurance but I’d say 1/4 or 1/3 will be declined. As a Broker I can refer these folks to Cover Colorado but while I enjoy helping people in my state, I also have to earn a living and get paid for doing it. Cover Colorado does not pay a broker commission. This move does not help our economy either. Many brokers will not be able to continue offering services if we loose small group businesses, sales reps at the insurance companies will probably be downsized, employers will no longer be able to attract employees if there’s no benefit program, and uninsured claims will go on the rise. Not good Governor. Not good.

  2. It’s a tough situation. On one hand, we don’t want our politicians to be strictly looking out for the profits of specific industries or corporations. On the other hand, people in those industries need their lawmakers to be looking out for their economic interests.
    That is the real dilemma of a for profit health care system. The #1 priority for any company or industry is profit in order to take care of the shareholders and employees. Delivering quality care to patients should be top priority. Lawmakers could focus their attention on making the system better and more efficient (like Medicare), instead of trying to balance the economic interests of the industry with quality of care for their constituents.

  3. Wow!! House Bill 1355: Another slap in the face for the small business!! Why should healthy small groups pay the same insurance rates as unhealthy small groups? As far as I’m concerned, this is descrimiation against healthy people. A case for the NAACP?! It only makes logical sense that those who are practicing prevention and not needing to utilize their health benefits should receive discounts. The car insurance industry continues to practice this standard. For car insurance rates to be quoted, the insurer investigates your credit and accident history. Rates are dependent upon these factors. It’s how the insurance business has always managed its risk. Higher rates for riskier individuals! This bill only benefits the insurance company! Those elected to our congress are suppose to be looking out the the little guy, not the insurance giants!!! Not good Govenor!

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