Colorado Gov. Bill Ritter on Friday signed into law House Bill 1355, which prohibits small-group insurers from setting premiums based on the health status of employees in a particular company.
The Colorado House and Senate passed the bill to prohibit the practice of "rate-banding" in April in a virtual party-line vote.
Factions on both sides disagreed on whether rate banding is a problem or a solution to rising health care costs.
Opinions also differed on whether high-risk policyholders should pay more for escalating medical charges or if the expenses should be spread over the general population.
Bill supporters argued that it created parity between healthy groups and those who might be penalized because one or two employees experienced a serious illness or injury.
Critics said it would result in higher premiums for most small businesses and force some companies to drop coverage altogether or consider less-expensive options, such as health savings accounts.
Michael Huotari, executive director of the Colorado Association of Health Plans, said he was "disappointed" but not surprised that Ritter signed the bill. He estimated the premiums of 160,000 Coloradans will increase as much as 35 percent with the new law in effect. He predicted the hikes will force many businesses to drop coverage.
However, Houtari said there's no indication that small groups will leave the market because the bill is law.
Evan Dryer, the governor's spokesman, said Ritter signed the legislation because "he felt it was the right thing to do."
Dryer said the governor's office would monitor premiums in small-group markets to make sure there are no negative effects from the law. He added that legislators could move to reverse the measure if they feel it's necessary.
In making the decision on 1355, Ritter "reached out" to both sides of the debate, Dryer said.
Lawmakers have oscillated back and forth on the rate banding policy over the five years.
In an effort to stabilize premiums, the Legislature approved HB 1164 in 2003. The law allowed insurers that cover employers with fewer than 50 employees to charge "healthy groups" (employers with non-smokers and younger workers) up to 25 percent less for health insurance.
But apart from Aetna Inc.'s re-entry into Colorado's small-group market, critics said the 2003 law did little -- if anything -- to curb double-digit insurance premiums or give small businesses more choices, and resulted in huge premium hikes for some small businesses whose employees suffered from catastrophic illnesses or serious injuries.
Rep. Anne McGihon, D-Denver, who sponsored HB 1355, said in a released statement that Ritter's signature represents a triumph over "the lobbying forces of Big Insurance."
"We are leveling the playing field and making health care more accessible for the 63 percent of the uninsured who are employed," McGihon said.
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