New Mexico's loss is Colorado's gain: CO Senate passes SB20-215!

A lifetime ago (well, mid-February of this year, anyway), I wrote about New Mexico's Health Care Affordability Fund (HB 278), a bill which easily passed through the state House...only to be inexplicably stopped in its tracks in the state Senate a few days later.

The bill in question wasn't terribly complicated; it essentially just placed a new fee on health insurance carriers to finance a new fund which would in turn be used to reduce healthcare coverage costs for low- and middle-income New Mexicans. Furthermore, since some of the fees would be imposed on managed Medicaid programs which are mostly federally funded, it would have leveraged tens of millions of dollars in federal funding as opposed to all of the fees coming from state residents. Had it gone into effect, HB 278 was expected to generate around $125 million in revenue for the state to use to reduce premiums and cost sharing for enrollees.

The icing on the cake is that had it passed into law, HB 278 technically wouldn't have increased net taxes one dime...because it would simply be replacing the ACA's Health Insurance Tax (HIT) which was repealed last winter. Due to the odd timing of the HIT being repealed, the 2020 HIT was already baked into 2020 premiums nationally...which means the insurance carriers are generating the HIT revenue each month even though the HIT fees won't be collected from them by the federal government.

This means that any state which wants to has a unique, one-time opportunity to generate substantial amounts of state revenue without officially raising taxes...which is a critical distinction when you're running for re-election.

Unfortunately, HB 278 was stopped dead in its tracks by the Democratic chair of the New Mexico Senate finance committee...and it wasn't a fluke: He, along with a handful of other New Mexican senators elected as Democrats apparently have long caucused with Republicans, meaning that even though Dems officially have a majority in both the state House and Senate, the GOP still effectively has control of the senate. This is a similar situation to the one New York Democrats found themselves in for many years with the Independent Democratic Conference until 6 of its 8 members were defeated by more progressive Democrats in 2018.

The good news is that just a week ago, the NM senator who blocked HB 278 was defeated by his own progressive primary challenger...along with the rest of his GOP-caucusing crew:

Explosive results confirmed by AP calls in New Mexico:

*5* incumbent Senators were ousted by progressives in the Democratic primaries yesterday.

They include the President Pro Term (Papen), the chair of the Finance committee (Smith), & 3 others with conservative reputations.

— Taniel (@Taniel) June 3, 2020

That was then...this is now:

Colorado Democrats just proposed an enormous change to how health insurance programs are funded

...Senate Bill 215 would create a new fee on the health insurance premiums paid by close to a million people in the state. Supporters say the fee would take the place of a federal tax that is expiring at the end of the year. Money from this new fee — estimated at around $100 million per year — would be used to pay for the state’s reinsurance program and provide additional subsidies to lower health insurance prices, collectively benefiting hundreds of thousands of people who purchase coverage on their own or are currently uninsured.

The reinsurance program has been credited with reducing premiums in the state’s individual insurance market this year by 20%, but funding to sustain the program has seen frequent turmoil. The new bill extends the program for five years.

...The bill imposes a 1% fee on premiums collected by nonprofit health insurers and a 2.5% fee on premiums collected by for-profit insurers. The fee applies only to plans regulated by the state Division of Insurance — meaning it excludes the health insurance plans that cover workers at many large companies, which self-insure their health plans.

...The bill’s fiscal note, prepared by nonpartisan legislative fiscal analysts, estimates the fee will bring in around $105 million in its first year. That’s roughly what insurance companies in Colorado pay now for the federal tax.

As it happens, the bill has moved very quickly through the state legislature this week:

Late night news from Colorado: The State Senate approved the bill on second reading. Next up: final passage in the Senate. Colorado is showing the rest of America how it's done. Smart and effective legislators lowering constituents' health costs at a key historic moment. Bravo!

— Stan Dorn (@standorn) June 9, 2020

Another news flash: the State Senate in Colorado passed the bill!!!! Great news for Colorado consumers, whose elected officials are acting boldly and smartly to lower health care costs. CO is setting the pace for other states. Now on to the House!!

— Stan Dorn (@standorn) June 10, 2020

Hopefully it won't be stymied in the Colorado House the way the New Mexico bill was in their Senate. Dems have a 19 to 16 majority, and as far as I know they don't have the same "GOP-friendly" Dem issue that New Mexico did.

In some ways this isn't quite as exciting as the New Mexico bill would have been for a few reasons:

  • The amount expected to be generated is smaller ($100 million vs. $125 million)
  • The state population is larger (5.76 million vs. 2.1 million), which means the revenue will be spread more thinly
  • Most of the money to be generated will be going to fund an existing program (the state's reinsurance waiver was implemented at the beginning of this year) as opposed to going beyond that

HOWEVER, this bill would still provide Colorado with the peace of mind of knowing that the reinsurance program will be fully funded for at least the next five years, which isn't nothing. In addition, the balance of the revenue generated would go towards further reducing premiums/etc., although the exact details are still apparently to be worked out:

...the money would provide funding for the reinsurance program at up to $90 million per year. Anything left over from that could go to additional subsidies to help people in the individual market buy insurance.

Advocacy groups that support the bill say those subsidies could, for instance, benefit the roughly 40,000 people in Colorado who are caught in the so-called family glitch. That issue prohibits people from getting federal subsidies to buy health insurance in the individual market if they have access to coverage through an employer, even if that employer-based coverage is wildly unaffordable. Other subsidies could go to help lower-income people whose costs are increased by the reinsurance program.

The bill also notes that people will be eligible for state subsidies regardless of their immigration status. Currently, immigrants without documentation are not eligible to receive federal subsidies for health insurance and are believed to make up a disproportionate share of the state’s uninsured.

The rough math sounds like there'd be perhaps $15 million "extra" funding for one or more of these programs. $15 million divided among 40,000 people (assuming it was used to help the "family glitch" folks) would only amount to around $375 apiece or just $31/month per person, which wouldn't help much. The second option is basically what California is doing with their enhanced/expanded premium subsidy program. Around 120,000 Coloradans currently receive ACA subsidies; again, $15 million would only reduce their costs by around $10/month apiece.

For comparison, around $100 million of New Mexico's revenue would have gone directly towards reducing healthcare coverage costs. New Mexico has 42,000 exchange enrollees, of which 32,000 are subsidized; splitting it up among them would have amounted to around $260/month apiece on average. Alternately, it would have funded a more robust reinsurance program had the state gone Colorado's route.

In any event, this development is certainly worth celebrating, just don't expect it to have the same impact vs. the status quo that the New Mexico bill would have had it become law.

Speaking of which, it's still possible that New Mexico will take another crack at their version as well:

NM had a similar bill (HB278) that passed the House but was refused a hearing in the Senate. It would make sense to pass it in next week's Special Session.

— Health Action NM (@HealthActionNM) June 10, 2020

Stay tuned...