Colorado Bills Call for Cracking Down on Insurance Industry

Colorado Democrats plan to introduce a package of bills to require health insurance firms to get prior approval for rate hikes, punish them for improper denial of claims and encourage efficiencies. The reform package could drive up auto insurance rates, insurance insiders say.

The plan, dubbed the Insurance Rate Accountability, Transparency and Equity Act of 2008, was unveiled at a news conferenceon March 30.
Rep. Morgan Carroll, a Democrat from Aurora, said insurance companies currently are allowed to increase rates at will and get approval from the Division of Insurance later. She said they are rarely punished if increases are found to be unjustified.

“This way, people will know they are getting good rates, they are getting what they paid for and costs will go down as they become more efficient,” Carroll said.

Carroll said she is considering adding auto insurance in a separate measure.

House Speaker Andrew Romanoff, D-Denver, is sponsoring a bill that would impose penalties if a claim is improperly denied. He said Coloradans deserve coverage that counts.

“We ought to make sure you get what you pay for, you don’t pay too much and you see what you are getting,” Romanoff said.

Carroll said Colorado’s health insurance rates are seventh highest in the nation, according to the Kaiser Family Foundation, even though Coloradans are healthier than residents in most states.

She said auto insurance rates also are too high, even though the state went from no-fault insurance to a courts-based system. Carroll said that in 2002, one dollar of a typical insurance premium purchased $188 in benefits. In 2007, that same dollar only bought $46 worth of coverage.

“The industry says the current system is working. It’s not working,” she said.

Carole Walker, spokeswoman for the Rocky Mountain Insurance Information Association, said the reform package would drive up auto insurance rates, not lower them. She said states that require prior approval for rate hikes sometimes take as long as two years to make a decision, which pushes insurance companies to ask for even higher rates because they can’t predict what will happen that far out.

Walker said most rate hikes are found to be justified and that the proposed plan would only delay the inevitable.

“They still have to be applied,” she said.

Mike Huotari, spokesman for the Colorado Association of Health Plans, said Colorado law already requires health insurance carriers to submit rate increases with supporting information and that the Division of Insurance has the authority to reject rates that are inadequate, excessive or discriminatory.

He said rate increases are driven by technology and improvements in health care, not profit, waste and administration as critics charge.

“The only thing this will do is add to the cost of complying with the new rules and the cost to the state of administering them,” Huotari said.