Source: The Sum & Substance

January 23, 2025

A Colorado enterprise that offers free health insurance to undocumented immigrants and helps fund the state’s reinsurance program is likely to be short of revenue by 2027, spurring consideration of options that include raising fees on statewide health insurance policies.

The Health Insurance Affordability Exchange board will meet at 8 a.m. Friday to discuss how to deal with the situation and how to grapple with the uncertainty around future federal funding. If it elects to pursue a fee increase, such an effort would have to go before the Legislature prior to the May 7 conclusion of its 2025 regular session.

Any potential boost in pass-through fees to the purchasers of health-insurance plans — Colorado employers and residents — would come at a time when the state already is grappling with an affordability crisis and business owners warn they can’t take more costs. Yet it would come too as Colorado hospitals are treating increased numbers of uninsured patients, meaning any action or inaction that could move people off the rolls of the insured would tax health-care systems and force them to increase costs in other ways.

Is a fee hike a potential solution?

Adam Fox, deputy director for the Colorado Consumer Health Initiative, said that while he is sure that the enterprise needs more funding, he isn’t sure exactly where the funding would come from, though he wouldn’t rule out the possibility of seeking a fee increase. But he also understands the concerns of businesses at a time when their premiums already are rising and said there must be discussion of how to deal with all interests simultaneously.

“I’m not entirely sure that we have great answers (on where to seek more money),” Fox said in an interview in late 2024. “There’s potential to look at increasing the fee. But what does that look like? And where’s the balance point for that?”

Legislators established the HIAE in 2020 to fund the state’s reinsurance program and its Omni Salud program, which cost the state government about $90 million each in 2024.

The reinsurance program subsidizes part of the highest-cost claims filed by Coloradans and, in doing so, keeps costs down in areas of the state like the central mountains where health-insurance competition is negligible, and premiums are higher. Omni Salud, meanwhile, provides zero-cost coverage for undocumented residents ineligible for other government programs and has seen demand grow in recent years.

Current fee revenue drives significant funding

To fund these programs, the enterprise charges 2.1% fees on each health-insurance policy in the large- or small-group or individual markets issued by a for-profit insurer and 1.15% fees on policies sold by nonprofits. It also receives several hundred million dollars annually in federal pass-through funds thanks to a waiver that the reinsurance program has gotten and that is not likely to go away.

Those fees are in addition to another 2% tax that the state assesses on all health-insurance premiums that does not fund the HIAE.

The HIAE received $645 million in funding in 2024 — a total that included federal Inflation Reduction Act subsidies and was $109 million more than needed to fund the two programs, allowing it to save surplus for future years, according to the Colorado Division of Insurance. But with the Republican-controlled congress and President Donald Trump expected to end those IRA subsidies after 2025, revenues and surplus are on a trajectory to shrink and fall $64 million short of needed expenses by 2027.

Pressure also is swelling on the HIAE coffers because, like with recipients of Medicaid, health-care utilization by participants in the reinsurance and Omni Salud programs is growing and the acuity of their conditions is increasing, leading to bigger bills. Meanwhile, applications for the Omni Salud program are at record levels, boosting enrollment from 11,000 people in 2024 to roughly 12,000 in 2025, HIAE director Laura Mortimer said during a Nov. 14 stakeholder meeting on this issue.

Advocates: Lack of action could leave people uninsured

A shortfall in funding could lead to increases in the cost of individual insurance policies subsidized by reinsurance in high-cost counties or possibly to rollbacks in the number of Omni Salud enrollees. Both scenarios would push insured Coloradans into having no insurance, meaning hospitals will get little to no reimbursement when those people come to emergency rooms with severe issues — a situation that could lead hospitals to raise costs for privately insured patients to offset those losses.

“We’re going to have to pay for it somewhere in the system,” said Joe Sammen, co-executive director of the Center for Health Progress. “If you delay your care, it’s going to cost more to everybody over the long haul. Those costs, whether they hit at the point of care or hit later, will hit hard.”

 But business leaders already are raising the alarm that increasing the fees they must pay on each premium will have deleterious consequences, particularly on the workers who ultimately must pay those fees. Colorado legislators of both parties have said that reducing the cost of living — now listed as being the fifth-highest cost of any state by CNBC — is their top priority this session, and more pass-along fees only would exacerbate that.

Any potential fee increases would be in addition to 7.1% average premium increases in the small-group market and 5.6% average increases in the individual market that Coloradans are paying this year. And legislators will consider a proposal, Senate Bill 48, that would require insurers to cover highly expensive anti-obesity drugs like Ozempic and Wegovy — a mandate one insurer said could be individually responsible for premium increases of $18 to $24 per month per policy, whether or not customers use the drugs.

“Not sustainable for small businesses”

Dr. Catrina Bubier — president of Ob/Gyn Affiliates of Littleton, a practice with about 50 employees — said the potential of further insurance cost increases because of potential fee boosts leaves her in an unsettling position.

Understanding as a physician the need to have healthy employees, her practice now covers 100% of insurance premiums, but annual 10% premium increases in recent years force her to balance that with cost controls in other areas of the business. Further fee increases likely would mean that Bubier would require employees to take on some portion of their insurance costs, and she knows that then could lead them to hold back on paying for other necessities and cause financial hardship.

Thus, Bubier hopes HIAE leaders don’t seek a fee increase and instead re-examine their spending. She understands that there is societal benefit in funding Omni Salud, she said, but feels that the reverberations of charging Coloradans to grow that program will have negative consequences.

“At some point, the small businesses are not going to be able to pay as much of the balances of their employees as they do, so employees will have to pay more. It’s just not sustainable for small businesses,” Bubier said in an interview. “I understand the social situation where you want to help the whole. But I don’t think this is the way to go about it. And the numbers are going to keep going up.”

Like the advocacy groups, Colorado Insurance Commissioner Michael Conway would not commit in November to how he planned to find more funding, but he emphasized that it must be done. He said his division will “stay committed to the things the Legislature has tasked us to do,” and that probably means boosting HIAE revenues to sustain the reinsurance and Omni Salud programs for the near future, he said.