Exchange board votes to scoop up millions from two higher fees

By Katie Kerwin McCrimmon

Despite fury from lawmakers the day before, Colorado’s health exchange board voted on Thursday to collect millions of additional dollars from all Colorado health insurance customers, even those who have nothing to do with the exchange.

Kevin Patterson, left, is the new interim CEO for the health exchange. Outgoing interim CEO Gary Drews, right, and Patterson recommended fee hikes that the exchange board passed late Thursday.

Kevin Patterson, left, is the new interim CEO for the health exchange. Outgoing interim CEO Gary Drews, right, and Patterson recommended fee hikes that the exchange board passed late Thursday.

On top of that “broad market assessment,” the board also voted to more than double the user fees levied on people who buy insurance through Colorado’s exchange. Those user fees will rise from 1.4 percent to 3.5 percent on each plan sold through the exchange.

The higher broad market fee is projected to allow Connect for Health Colorado to scoop up about about $20 million in 2016. It has been set at $1.25 per member per month on all health insurance customers this year and will rise to $1.80 per member per month next year. Health insurance companies repeatedly have said they pass the fee straight to customers.

The other fee — which is a charged to people who buy health insurance plans through the exchange — is projected to bring in $10 million in 2016, $25 million in 2017 and $28 million the following year.

But those financial projections are based on aggressive enrollment targets that exchange managers may have trouble meeting.

Thus, even with the cash infusion, Colorado’s health exchange may not survive.

Once projected to operate for about $26 million a year, the outgoing interim CEO Gary Drews now expects the exchange to cost at least $54 million a year to run. The exchange has been hemorrhaging cash to prop up sales of private health insurance.

So far, about 150,000 people have signed up for the private insurance, while one in five Coloradans now qualifies for Medicaid, the public health insurance program for low-income people and the disabled.

An oversight board from the Colorado legislature plans to keep taking a close look at exchange operations and the chair of that board, Sen. Ellen Roberts, R-Durango, this week said she hasn’t decided whether Colorado’s exchange is worth keeping.

Some other state-based exchanges are finding the costs of running their exchanges far too high and they are now considering folding into the federal health exchange. But, a decision from the U.S. Supreme Court that is due in late June could undermine the federal exchange if the justices rule that the it cannot hand out tax subsidies to make health insurance cheaper.

For now, Colorado will continue with a state-based exchange and the new interim CEO, Kevin Patterson, will press state and federal officials to cough up significant cash to help pay for thousands of Medicaid customers who have enrolled in health coverage through an exceedingly expensive Connect for Health call center.

Before the vote, exchange board member Steve ErkenBrack warned fellow board members that “there was a lot of skepticism” from lawmakers about fee hikes. ErkenBrack, who is the CEO of the health insurance company, Rocky Mountain Health Plans, did not vote on Thursday, citing a conflict of interest. His fellow board members voted unanimously to support both of the fee hikes.

Adela Flores-Brennan, another board member who attended Wednesday’s marathon five-hour hearing at the legislature, noted that lawmakers are “concerned about performance issues and putting more funding into the marketplace when there are complaints that they’ve been hearing from their constituents.”

Before voting yes, board member Dr. Mike Fallon said he, too, is angry about increasing fees on Coloradans who don’t use the exchange while Medicaid clients get free health insurance and neither the state nor federal government is paying anything to enroll them through the exchange.

“Medicaid needs to pay its fair share,” Fallon said. “It is both politically infuriating and it’s unfair to the people of Colorado who don’t participate in the exchange. And it would take the pressure off of HCPF (the Department of Health Care Policy and Financing, the state’s Medicaid managers) to do the right thing.”

Board member Eric Grossman told exchange managers that they cannot keep coming back for additional cash, but that’s exactly what has happened as the exchange has finished spending nearly $200 million in federal startup grants.

Drews insisted that financial sustainability is possible, but only if “all the pistons” fire perfectly.

That job will now fall on the new interim CEO, who started his job one week ago. Along with lobbying hard for Medicaid dollars from his former colleagues at the state where Patterson used to work for the governor, Patterson plans to tie all enrollments to revenues.

“We wanted to get as many people enrolled (as possible),” Patterson said. “If you’re starting to build your expenses, you want to make sure they’re tied to a revenue source. Who is enrolling whom?”

Patterson said he wants to dramatically improve the small business portal for the exchange while at the same time appealing to individuals who no longer can buy the old plans that don’t include new, required essential benefits.

Grossman summed up the frustration that is building in all quarters.

“What we’re hearing loud and clear from this board is that this is a step toward sustainability,” but he noted, “we’ve heard this story before.”

Said Grossman: “We can’t have this problem again.”



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