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Protecting Coloradans from insolvent insurers

On Tuesday, April 25, 2023, Katie Wallat, CCLP’s Interim Director of Administrative Advocacy, provided testimony (written by Bethany Pray, CCLP’s Interim Executive Director) to the House Public & Behavioral Health & Human Services Committee for House Bill 23-1303, Protect Against Insurers’ Impairement and Insolvency. CCLP is in support of HB23-1303.
Thank you, Madame Chair and Members of the Committee,
My name is Katie Wallat, and I am an attorney at the Colorado Center on Law and Policy. CCLP is a nonprofit, nonpartisan advocacy organization that works to advance the health and well-being of Coloradans facing economic insecurity. CCLP strongly supports House Bill 23-1303, Protect Against Insurers’ Impairment and Insolvency, with the amendments that are to be introduced by the sponsor.
CCLP supports the goals of the legislation, which are pragmatic, fair and necessary. This legislation, based on the Model Act created by the National Association of Insurance Commissioners, primarily aims to ensure that covered claims arising from the insolvency of insurers can be resolved in a timely manner.
While Colorado has had a robust private insurance market over the past several years, it is incumbent upon the state to be prepared to manage potential insolvencies and reduce impacts on both providers and carriers. The Model Act, adopted now in the majority of states, reforms the guaranty fund mechanism in two important ways. First, the bill brings Health Maintenance Organizations (HMOs) into the guaranty fund, relying on HMOs to contribute to the fund when an insolvency occurs and supporting HMOs if they face an insolvency. Second, this bill helps to better distribute the impact of any future long-term care insolvency, more equitably sharing the burden between health insurance and life insurance entities.
And the bill adds an additional innovation to those provided by the Model Act language. By supporting the goals of the federal risk adjustment program, it ensures that those carriers that take on higher-risk populations and incur greater expenses, can rely on scheduled payments from insurers with lower-risk populations. Without that innovation, carriers would be less able to count on those payments that allow them to serve sicker populations – including people with chronic health needs, and those whose health has been impacted by the environmental, nutritional, and psychological tolls of poverty, and other social determinants of health.
These changes simply can’t happen soon enough. The Friday Health Plans have already become insolvent in Texas and have begun layoffs in the Alamosa area. Were Friday, with its substantial footprint in rural Colorado, to be declared insolvent here, it would put rural providers at risk of nonpayment – at a moment when that vital part of the rural fabric is already facing financial difficulties. In a report by the Center for Healthcare Quality Payment Reform, authors found that 16 rural hospitals have had to cut services and 7 were at risk of closure in Colorado. A second insurer, Bright Health, is “staring down bankruptcy” by some accounts and Colorado must be prepared for the possibility of that insolvency as well.
This legislation, based on an act that is already law in most states, is urgent and essential to the health of the insurance market and the providers who depend on the stability of that market for reimbursement. We ask for your strong support today. Thank you.
HB23-1303 was signed into law on May 15, 2023.