The Colorado Health Exchange: Less Choice for More of Your Money


The Colorado Health Benefit Exchange, Connect for Health Colorado (C4HCO), was marketed as reducing costs and increasing choice for individuals and small businesses purchasing health insurance. So far, it does neither. Implementation of the exchange is expected to cost over $100 million with annual operating costs in the tens of millions, and fees will be assessed against insurance premiums. Of the 749 plans submitted to the Colorado Department of Insurance for 2014, 507 are not being offered in the exchange.

Carriers who have submitted plans to the exchange have restricted network coverage. For example, All Insurance uses the UnitedhealthCare Choice Plus Network which does not include Centura Health or HealthONE hospitals. This excludes 23 hospitals in Colorado. Some carriers limit plan availability to certain geographic areas. “HMO Colorado is available statewide to employees residing OUTSIDE Adams, Arapahoe, Broomfield, Denver, Douglas, and Jefferson counties.” These are six of the most populous counties in the State.

Coverage is most limited in Boulder, Grand Junction, Pueblo, and the Resort towns. These areas will have access to about half of the silver level individual and family insurance plans.

C4HCO has also increased costs for rate payers across Colorado.

Insurer filings for 2014 report an Exchange fee of 1.4%, though the Health and Human Services department “proposed that the monthly user fee for insurance providers…will be 3.5% of premiums.” Rocky Mountain HMO explains that “annual increases in the cost of health care are expected to continue, since there are no inherent cost controls in the new plan designs.”

C4HCO was established by SB11-200, co-sponsored by Representative Amy Stephens (R-Monument) and Senator Betty Boyd (D-Lakewood)  in connection with the Patient Protection and Affordable Care Act of 2010 (ACA, ObamaCare), according to the fiscal note for SB11-200. However, Myung Oak Kim, C4HCO’s spokeswoman, said Colorado’s Health Benefit Exchange is something “the Colorado legislature decided to do on its own” in an attempt to distance Colorado’s Health Exchange from the ACA.

The ACA requires implementation of Health Insurance Exchanges. These exchanges are designed to broker small group or individual health insurance plans offered by insurance companies and to distribute premium subsidies to households below 400% of the federal poverty line who are not eligible for Medicaid. States have three choices: set up their own exchanges, allow the Department of Health and Human Services to set up a Federally-facilitated Exchange (FFE) within the state, or enter into a Partnership Exchange whereby the state participates in an FFE. Exchanges must be operational by January 1, 2014.

Colorado did not have to set up a health care exchange. In fact, 27 states have refused to set up exchanges and will default to FFEs. Here’s why: the federal government initially provides the states with funding to set up exchanges—Colorado received $61.4 million for Level 1 and $116.2 million for Level 2, for a total of $177.6 million in federal establishment grants—but the exchanges must be self-sustaining by January 1, 2015. Costs to sustain the Health Exchange are estimated by the state of Tennessee’s Department of Finance and Administration to be $20-$40 million annually. If states default to FFEs, they avoid the administrative nightmare of setting up an exchange and might save their citizens from annual expenses after the federal start-up funds run dry.

Compliance with the ACA adds several other costs. The Rocky Mountain HMO filing provides a partial list of new fees and taxes: $1.80 per member per month, a health insurance provider fee, a fee for risk adjustment and data collection, the patient-centered outcomes research tax, and the $5.25 per member per month transitional reinsurance contribution.

People will now pay for benefits they may not need, and unlike those covered by employer health benefits, people who shop in the exchange pay with after-tax dollars. Pediatric vision, pediatric dental, substance abuse, women’s wellness, and habilitative care benefits are all deemed “essential health benefits” under the ACA and add an additional $17.93 per member per month.

Patty Fontneau, CEO of C4HCO, has argued that the Health Exchange allows health care tailored to Colorado needs, but, as the State of Indiana recognizes, federal regulation allows very little flexibility. Fontneau also believes that it “makes sense to do regardless of what happens with the Affordable Care Act. It’s a smart business decision. It allows a competitive marketplace. It will allow a competitive marketplace to have appropriate influence on the cost of health insurance.”

Despite Fontneau’s claims, the exchange is not a competitive marketplace; it is managed competition. Insurers are prohibited from varying rates based on health factors, all enrollees in all non-group plans offered by the issuer must be considered as members of a single risk pool, and carriers may not deny coverage based on pre-existing conditions. Colorado’s choice to establish a Health Insurance Exchange means that the Exchange will likely continue to operate even if the ACA is repealed.


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