Individual market carriers in Colorado have proposed rate changes for 2016 that range from a 5.1 percent decrease (Cigna) to a 34 percent increase (Rocky Mountain HMO). Regulators are still reviewing the rates; they won’t be finalized for several more weeks, and could change before they’re final.
In the Connect for Health Colorado exchange, two not-for-profit carriers currently have three quarters of the market share. Colorado HealthOP, the ACA-created CO-OP, garnered almost 40 percent of the exchange market share in 2015, while Kaiser Permanente got 35 percent of the exchange enrollees. Rocky Mountain Health Plans (also a not-for-profit carriers) has 15 percent of the exchange market share in 2015, so their proposed 34 percent rate hike is certainly not insignificant.
The partially weighted average rate increase proposed for the individual market in Colorado currently sits at about 13 percent, but Rocky Mountain Health Plans may end up with lower rates than they’ve proposed, thanks to a $68 million infusion from the reinsurance program. The Colorado Division of Insurance will be reviewing rate proposals over the next several weeks, and final rates should be available in September.
Last fall, Colorado HealthOP’s finalized rates for 2015 undercut the rest of the health insurance market in eight of the nine rating areas in Colorado, and their low premiums translated into significant sales. But for 2016, Colorado HealthOP has proposed an average rate increase of 21.6 percent. Kaiser Permanente was more expensive than Colorado HealthOP in most areas of the state for 2015, but they’ve only proposed a 2 percent rate hike for 2016. Assuming rates are approved roughly as-proposed, there could be another shake-up of the market share in 2016.
2015 enrollment: Exchange grows, but total individual market shrinks
Colorado is one of only two states – Massachusetts is the other – where total individual market enrollment declined during 2014. Nationwide, individual market enrollment, including on and off-exchange policies as well as grandfathered and grandmothered plans, increased by 46 percent in 2014. But in Colorado, enrollment dropped by 4 percent. This is despite the fact that Colorado’s population grew by nearly 84 thousand people from mid-2013 to mid-2014 – only three states had a higher percentage growth in population.
However, the state-run exchange, Connect for Health Colorado, saw enrollment grow to 141,639 people during the 2015 open enrollment period – an increase of about 10 percent over the total at the end of the 2014 open enrollment period. By April 30, total enrollment in medical plans had grown to 145,506, and 88 percent of those enrollments had been effectuated by the beginning of May.
In July, Connect for Health Colorado released an enrollment update for 2015 with data through the end of June, and total effectuated enrollment stood at 138,502. But that includes SHOP enrollments as well as people who purchased dental-only coverage. The report also includes the number of effectuated medical plan enrollments with and without premium subsidies and cost-sharing subsidies (74,583 with subsidies, and 59,617 without). These are medical-only plans, so adding the two amounts together, we get 134,200 people with in-force medical coverage through the exchange as of the end of June.
At the end of March, HHS reported that Colorado had 122,976 individuals with effectuated coverage in force, so the Connect for Health Colorado report indicates an increase of more than eleven thousand people in the second quarter, including those who had already enrolled by the end of March but hadn’t yet paid their first premium at that point (if they hadn’t paid, they weren’t included in the HHS report).
Ninety percent of Colorado’s exchange enrollees picked nonprofit health plans in 2015: 40 percent chose Colorado HealthOP, the ACA-created CO-OP, 35 percent selected Kaiser Permanente, and 15 percent went with Rocky Mountain Health Plans. Kaiser got 46 percent of exchange enrollees in 2014, and auto-enrollment likely helped their retention, despite the fact that Colorado HealthOP offered the lowest rates in all but one of the rating areas in Colorado for 2015.
Of those who enrolled during open enrollment, more than 94,000 were returning customers, and about 47,000 were new to the marketplace in 2015. See detailed enrollment metrics such as enrollment by age group, average premiums with and without tax credits, and much more.
2016 fiscal year budget
On June 8, the Connect for Health Colorado board approved a budget for the 2016 fiscal year, which began on July 1. Although it incorporates increased sales projections and higher fees, exchange leadership is bracing for operating losses of $4.6 million a potential $13.3 million deficit in the 2016 fiscal year.
The exchange is projecting $40.3 million in revenues, and nearly $53.7 million in expenses, including operating costs as well as $8.8 million in “additional IT expenses.” Previous exchange leaders had stated that Connect for Health Colorado could operate on a $26 million annual budget, but that has turned out to be a significant under-estimation.
Lawmakers in Colorado are also considering using Section 1332 waivers to change how Connect for Health Colorado is structured, but there hasn’t yet been any consensus in terms of how to change it, or the scope of those changes.
Exchange approves higher fees
The remainder of Connect for Health Colorado’s $177 million in federal funding will be exhausted this year. The exchange will have to be self-sustaining once the federal funds run out, and board members have noted that higher fees are necessary in order to generate sufficient revenue.
Currently, the fee is 1.4 percent of premiums, which is significantly lower than the fees charged by other exchanges with similar enrollment counts (generally 2.5 to 3.5 percent; in states that use Healthcare.gov the fee is 3.5 percent). On May 10, Connect for Health Colorado recommended increasing that fee to at least 3.5 percent of premiums. They also recommended increasing the monthly individual market fee from $1.25 to $1.80 per policy (including off-exchange policies).
Both of these changes were approved by the exchange board of directors on May 14. The exchange board was scheduled to meet next on June 8, but they moved up their schedule in order to vote on the fee increases as soon as possible after they were proposed. The fee increases will go into effect January 2016; the new fees will be 3.5 percent of premiums for all plans sold through Connect for Health Colorado, and $1.80 per policy per month for all private plans in the state.
Together, the two fee hikes are projected to increase revenue for Connect for Health Colorado (over FY 2015 revenue) by about $7.8 million. $5.8 million of that would come from the increased fee on policies sold within the exchange, and the remaining $2 million would be generated by the additional fee on all policies sold in the private market in Colorado.
No money from Medicaid, but that could change
Unlike other state-run exchanges, Connect for Health Colorado does not receive compensation from CMS for enrolling applicants in Medicaid, despite the fact that the exchange enrolled nearly 80,000 people in Medicaid during the 2015 open enrollment period (Medicaid enrollment continues year-round). Interim CEO Kevin Patterson is working to change that, and hopes to secure millions of dollars in Medicaid reimbursements to supplement existing revenue sources for the exchange.
The four other state-run exchanges with similar enrollment totals all receive at least a third of their funding – and as much as more than half of their funding – from Medicaid. But Connect for Health Colorado doesn’t get any funding from Medicaid (and agents/brokers who enroll people in Medicaid through Connect for Health Colorado don’t receive any compensation, unlike other states).
The exchange can request reimbursement from CMS for expenses incurred to enroll people in Medicaid, and the 2016 revenue projection includes $2.5 million in recouped funds from CMS. That still pales in comparison with the $15 million to $29 million that other similarly-sized exchanges are reimbursed annually by Medicaid.
2016 predictions and open enrollment
The exchange is projecting 217,000 enrollees by June 2016 – an aggressive goal, but the state’s decision to cancel all non-ACA-compliant plans by the end of 2015 should help boost exchange enrollment in 2016.
The 2015 open enrollment period for private insurance has ended, and Colorado is one of the few states that did not offer a tax-related special enrollment period.
Until the next open enrollment period begins in November, opportunities to get health insurance are limited. You can purchase insurance if you have a qualifying event during the year, and Native Americans can enroll at any time. Enrollment for Medicaid and Child Health Plan Plus (CHP+) are open all year.
New leadership and comprehensive audit
As of May, the Colorado exchange has a new interim CEO – Kevin Patterson – who took over from Gary Drews. Drews was at the helm since August 2014, although he did not apply to be the permanent CEO. The permanent CEO position is still open, and although the board nominated a replacement in early April, lawmakers still have to weigh in on the decision.
Governor Hickenlooper signed Senate Bill 19 into law in April, allowing for a comprehensive performance audit of Connect for Health Colorado. The upcoming evaluation will be much more than a standard financial audit, and includes a “complete and thorough audit of the operation of the exchange.”
The Connect for Health board approved a $66.4 million budget for the fiscal year running from July 1, 2014, to June 30, 2015. The budget includes a $1.25 per-policy-per-month assessment on insurance carriers (the exchange has proposed that this be increased to $1.80), which officials say will allow the marketplace to maintain an operating reserve of $13 million. The assessment applies to all policies, not just those sold through the marketplace. According to Health News Colorado, the 2015 budget includes:
- $29.5 million for technology
- $13.6 million for the customer service center
- $7 million for salaries, legal and accounting fees, and travel
- $6 million for the assistance network
- $4.8 million for marketing, communication and outreach
- $2.3 million for consulting and operations
However, the exchange has gone back to the board repeatedly for more money.
In September 2014, the board approved $3.5 million for additional technology licensing fees.
In November 2014, Connect for Health sought a $4 million increase for the service center, explaining that the money was needed to handle higher than anticipated call volume due to a big change in subsidy amounts between 2014 and 2015. The board did not immediately approve the requested increase. Rather, it approved $875,000 at the time and an additional $300,000 in December.
In January 2015, the Connect for Health board of directors approved $322,000 in emergency spending to address enrollment system problems. The emergency spending was needed to fund workarounds to help people complete the enrollment process, but did not address the underlying problem.
In early February, Connect for Health requested $2.8 million — again for the service center. The board deferred making a decision.
Connect for Health Colorado enrollment in 2014
Connect for Health Colorado, the state-run health insurance exchange, far exceeded the qualified health plan (QHP) enrollment target of 92,000 set by the Centers for Medicare and Medicaid Services (CMS). Connect for Health Colorado announced more than 129,000 people had signed up for QHPs as of April 23. Through special enrollment periods, QHP enrollment grew to 137,000 as of mid-2014. In addition, nearly 182,000 people qualified for the state’s expanded Medicaid program.
Only 60 percent of those Coloradans who purchased private insurance qualified for assistance to offset the cost. Nationally, 85 percent qualified for financial assistance. Colorado’s relatively low rate of financial assistance and the high premiums in some areas of the state explain why 40 percent of 2014 plans sold in Colorado were bronze plans compared to 20 percent nationally.
Background on Colorado’s exchange
Gov. John Hickenlooper informed the federal government in October 2012 that Colorado intended to run its own health insurance marketplace, and the state received federal approval of its plan in December 2012.
Unlike politicians in most other states, Colorado legislators voted on a bipartisan basis to move ahead with a state-run exchange. Legislation to establish the state marketplace passed in May 2011 and was signed by Hickenlooper in June 2011. In early 2013, marketplace was given the brand name “Connect for Health Colorado.”
Colorado’s marketplace is governed by a 12-member board and led by interim CEO Gary Drews. Drews stepped in for Patty Fontneau, who took a position with CIGNA. Connect for Health expects to announce a permanent replacement by March 2015.
A limited performance audit conducted by the Colorado Office of the State Auditor in 2014 found problems with how Connect for Health Colorado handled its finances. The audit found that Connect for Health Colorado lacked adequate financial controls, such as not properly tracking payments and not following federal requirements for administering contracts. Auditors made four recommendations for improvements. Connect for Health officials accepted the recommendations and said they will implement them.
Citing the 2014 audit findings, the Colorado Senate in early 2015 passed two bills for increased oversight of the exchange. SB 19 authorized an in-depth performance audit, while SB 52 authorized committee review of any proposed bonuses for Connect for Health staff members. SB 19 passed the House 64-1 on March 16, but a House committee rejected SB 52 in late February.
HB 1066 did not make it out of the House Health, Insurance and Environment Committee. That bill sought to end operation of Connect for Health Colorado.
The Colorado Division of Insurance announced that transitional or “grandmothered” health plans must be discontinued at the end of 2015. Beginning in 2016, individuals must enroll in either ACA-compliant plans or in grandfathered plans (i.e., plans that don’t cover the ACA’s essential health benefits, but were in effect prior to prior to March 23, 2010).
Colorado health insurance exchange links
Connect for Health Colorado
State Exchange Profile: Colorado
The Henry J. Kaiser Family Foundation overview of Colorado’s progress toward creating a state health insurance exchange.