SB2 passes Senate – but it’s still a waste of time

Last week, the Colorado Senate passed SB2, with a vote of 18 to 17. All of the Democrats in the Senate opposed the bill, and it’s doubtful that it will pass in the Democrat-controlled House (it’s currently with the State, Veterans, and Military Affairs Committee in the House).

I wrote about SB2 in February, when the bill was still in committee in the Senate. Nothing has changed about my thoughts on the issue, so I won’t rehash all of them.

Senator Irene Aguilar – a tireless proponent of healthcare reform and consumer protections in healthcare – is opposed to SB2, and noted that it “would undermine our ability to sustain our exchange.” That’s true, of course. If voters get to determine whether Connect for Health Colorado’s administrative fee is legitimate or not, the exchange’s funding would face an uphill battle, and the sustainability of Connect for Health Colorado would be jeopardized.

It bears repeating, however, that Colorado has to have an exchange. The only question is whether we get to have control over it at the state level. If SB2 were to pass, and if voters were to strike down the exchange’s administrative fee, Colorado would still have to have an exchange, and subsidies would still be available – that part is set in stone.

But if Connect for Health Colorado couldn’t gain access to the funding needed to be sustainable, the worst case scenario would be the dissolution of the exchange, and a switch to Healthcare.gov. And the federally-run exchange would charge 3.5% of premiums – the same as Connect for Health Colorado’s administrative fee that triggered SB2. And under ACA guidelines, every carrier that sells plans both on and off the exchange would have to spread their total exchange fees across their full book of business… which is the exact problem that SB2 is attempting to address.

In short, there’s no getting around the fact that off-exchange premiums will technically include fees to pay for the exchange. We can either continue to do so under Connect for Health Colorado’s structure  – and maintain control over our own exchange at the state level – or we can use Healthcare.gov and pay the 3.5% fee to the federal government.

Either way, exchange carriers have to spread the fee across their full book of individual business, including off-exchange plans (and the fee for SHOP plans has to be spread across each SHOP carrier’s entire small group book of business). There is no getting around that with state-based legislation.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP. Follow on twitter and facebook.

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