Colorado State Health Care Initiative 20 (Amendment 69)
Initiative 20 got on the 2016 Ballot as Amendment 69. It was authored by Irene Aguilar, M.D. who is a Democratic member of the Colorado Senate and a primary care physician. A similar attempt to migrate a state to a single payer system was tried recently in Vermont. Vermont’s Bill went through the State House and Senate. It was signed by the Governor in May 2011. In December 2014, Vermont’s Governor retracted his backing of the single payer program due to a lack of clear funding and the negative effect of the taxes on businesses. Vermont’s single payer healthcare law, although passed and enacted, has essentially been abandoned. Similar to Amendment 69, Vermont’s Act 48 purported to integrate workers’ compensation medical benefits into a universal healthcare system.
Section 1332 of the Affordable Care Act (ACA) allows a state to obtain a waiver from the ACA, if the state sets up a system that provides the same level of coverage. Amendment 69 creates a single-payer system for health care in Colorado known as ColoradoCare.
ColoradoCare would be funded by a 6.67% payroll tax upon employers and a 3.33% tax on employee income. Other income sources would also be subject to the premium tax including rents, interest, dividends, capital gains, pensions and annuities. Certain income would not be subject to the premium tax. Maintenance and unemployment are not subject to the tax. In addition, the first $33,000 of Social Security or pension payments are not subject to the premium tax and the same is true for the first $60,000 for those filing jointly. Those who are self-employed or whose income is from investments would be subject to a flat 10% of that income as a premium tax. ColoradoCare would not be subject to TABOR (Colorado’s Taxpayer Bill of Rights) limits on new tax increases. The premium tax would be deductible from income taxes. The premium taxes are capped at $350,000 for individuals and $450,000 for those filing jointly. Increased funding, if necessary, would come from members. A “member” is someone who is 18 years old and has lived in Colorado for a continuous year.
Amendment 69 purports to raise 21 billion dollars by 2019. For comparison, the 2016 total state budget is approximately 25 billion dollars. The Amendment would nearly double State tax collection. The projected savings to businesses and individual is supposed to come from the removed need for employer and individual contributions to private plans, reduced administrative costs from private plans and general fraud prevention. Figures offered in support of Amendment 69 place current premium estimates for private health plans at a monthly contribution of $278 (employer) and $139 (employee) for an employee making $50,000 a year. These figures go up to $556 and $278 monthly for an individual making $100,000 a year. There are other ancillary purported savings from various sources based on no required co-pays or deductibles.
ColoradoCare would be operated by an interim board of 15 members appointed by the Governor and legislative leaders. This board would then develop an election process to create a new Board of Trustees and to formulate rules to ensure the board’s operation. It would also apply for the exemption from the ACA.
The interim Board would be replaced within three years with an elected 21-member Board of Trustees. The trustees would be elected from seven state districts of comparable size. The trustees would be charged with establishing purchasing authority for medications and medical equipment and with establishing an ombudsman’s office for beneficiaries and providers.
ColoradoCare would provide a comprehensive benefit package. It includes emergency and trauma services; primary and specialty care; hospitalization; prescription drugs; medical equipment, mental health and substance use services; chronic disease management; rehabilitative and habilitative services and devices; pediatric care, including oral, vision, and hearing services; laboratory services; maturity and newborn care; and palliative and end of life care. There are no deductibles, or co-payments and any potential co-pay requirements would have to be approved by the Board of Trustees. The “member” would choose a primary care provider. A beneficiary traveling or living temporarily out of state is still covered.
ColoradoCare would serve as a supplement to Medicare. For any other healthcare plan in effect ColoradoCare would be a secondary payer.
Delivery of Services
ColoradoCare will assume payment of health services. The interim Board and the Board of Trustees are charged with implementing payment and billing systems, handling quality and value concerns and any cost saving mechanisms.
AMENDMENT 69 AND INTEGRATION OF WORKERS’ COMPENSATION MEDICAL COVERAGE
Amendment 69 integrates workers’ compensation medical coverage into ColoradoCare. ColoradoCare offers this as an overall cost savings, citing statistical data affixing a 59% medical cost component for benefits paid under the workers’ compensation system.
Colorado Workers’ Compensation
Under Colorado workers’ compensation laws, an employer must obtain coverage for workers’ compensation insurance by becoming self-insured, obtaining coverage through a commercial insurer, or through the quasi-governmental entity, residual market insurer, Pinnacol Assurance. Medical benefits are part of the benefit package provided under Colorado’s workers’ compensation system. Medical benefits are the most expensive component of the benefit package, accounting for over 50% of the total workers’ compensation costs to employers and carriers. Workers’ compensation is an exclusive remedy to an injured worker. The injured worker cannot pursue the case in District Court against an employer so long as the employer has complied with the Colorado Workers’ Compensation Act.
Medical Care in Workers’ Compensation vs. ColoradoCare
There is no coordination between the proposed Amendment 69 and the Colorado Workers’ Compensation Act. ColoradoCare simply steps in as a payer for work injuries. By the same token, there is no coordination between recovery for injuries from a third party. ColoradoCare simply has recovery rights against third parties, presumably for amounts paid as a result of injury. Therefore, workers’ compensation third party recovery rights remain intact for benefits not covered under ColoradoCare.
Medical benefits under workers’ compensation are different than those provided under ordinary health insurance. Workers’ compensation is an event-based coverage, meaning that coverage is dependent on the event of a work injury and extends first so long as treatment continues to cure and relieve the effects of the injury to a point that treatment plateaus. Medical coverage is then extended for modalities to maintain claimant’s level of function. The goal of medical treatment under workers’ compensation is to get the worker back to work as quickly as possible and at an optimal level of function. The injured worker has no payment obligation for medical care. Under the circumstances, the employer and carrier are the primary stakeholders in the workers’ compensation system. Colorado allows the employer to maintain a degree of medical management of workers’ compensation claims that includes selecting the authorized treating physician in the first instance. Barring a change of physician that same physician serves as a gatekeeper, making necessary referrals and medically managing the claim to a point of maximum medical improvement and, in certain circumstances, determining a medical impairment for claimant’s injury or condition. Providers under the Colorado Worker’s Compensation Act generally follow medical treatment guidelines established for most injuries or conditions and are reimbursed under a medical fee schedule aligned with the services provided.
Health insurance is treatment based and extends for the length of the coverage without regard to the cause of the injury, or condition. Health insurance coverage is significantly less structured in approach to care and providers are reimbursed under different systems and rates. Further, there is less emphasis on treatment directed at an individual’s level of function.
Medical providers under the workers’ compensation system generally have accreditation as level I or level II. This training emphasizes treatment for functional gain and returning the injured worker to work within safe parameters. Many of these medical care providers are experts in occupational medicine and\or are board certified in physical medicine and rehabilitation. These providers have a working familiarity with medical treatment guidelines that are designed to foster the goals of treatment directed at functional improvement and returning an injured worker back to work. Further, only level II providers can provide a medical impairment rating for work injury or occupational disease. Treatment by a non-level II primary care physician would require a referral to a level II physician to provide a medical impairment rating. Given the circumstances, integrating medical care under ColoradoCare, with less emphasis on functional improvement and returning an injured worker back to work, will likely extend and increase the cost of this care.
The cost and duration of medical care is also directly tied to increased indemnity cost per claim. Without emphasis on returning to work within restrictions potential entitlement to wage replacement benefits will increase. In addition, an injured worker’s eligibility for indemnity benefits is capped depending on the amount of medical impairment assigned for an injury or occupational disease. To the extent an injured worker uses amounts under the applicable cap as wage replacement benefits, it may prevent the injured worker from receiving a full award of medical impairment benefits. It is likely that incorporating medical care for work injuries or occupational diseases under ColoradoCare will have the indirect effect of creating increased exposure for indemnity benefits on these claims. There is evidence of this from Vermont where private carriers were either unable, or unwilling, to offer an insurance product to cover indemnity benefits for Vermont’s workers’ compensation system without having medical benefits controlled under that system.
Safety Incentives in Workers’ Compensation vs. ColoradoCare
Workers’ compensation insurance premiums are a function of gross wages paid under specific job classifications and factored by an experience modifier. Therefore, there is strong incentive for employers to maintain a safe workplace, reducing work injuries and occupational diseases. This, in turn, reduces premiums by lowering the experience modifier. Integration of workers’ compensation medical benefits into a universal health care system reduces or eliminates employer incentive to ensure a safe workplace as there is no financial ramification tied to a higher experience modifier.
Indemnity Obligations Under the Colorado Workers’ Compensation Act
Notwithstanding Amendment 69’s integration of medical benefits into ColoradoCare, other benefits under the Colorado Workers’ Compensation Act are still required to be covered by employers. These benefits include wage replacement, medical impairment, disfigurement and dependent benefits. ColoradoCare does not integrate or eliminate these other benefits. Therefore, passage of Amendment 69 would require a mixed model benefit package, with publicly funded medical benefits provided under a different regulatory structure combined with privately funded benefits through a different insurance product. In an official report to the Vermont Legislature from Vermont’s Director of Healthcare Reform dated January 15, 2016, this type of mixed model is discussed. Private carriers in Vermont determined that private indemnity coverage required a new insurance product to cover indemnity portions of workers’ compensation claims. Private carriers operating in Vermont were not interested in offering this product due to the connection between the lost ability to manage the medical component of the work injury or occupational disease and the resulting indemnity obligations. Removing medical management of the claim would likely increase the amount of indemnity owed on that same claim.
Legal Issues Regarding Integration of Workers’ Compensation Medical Benefits into ColoradoCare
In general, the HIPPA privacy rules do not apply to workers’ compensation insurers, administrative providers or employers. These entities are allowed access to otherwise private records to coordinate medical care and to deal with work-related issues, like restrictions and return to work options. In Colorado, there are close connections between medical care providers, employers and workers’ compensation carriers and/or self-insured employers. The employer selects the authorized providers for work injuries in the first instance and forms are generated for return to work options. In addition, there are specific provisions for a change in medical care provider and authorization to treat for a work injury or occupational disease. Amendment 69 does not address these matters. Presumably, the entities involved in workers’ compensation matters would remain immune from HIPPA privacy issues, particularly in light of medical treatment and return to work issues connected to wage replacement benefits and permanent total disability benefits.
Colorado has a very strong exclusivity provision that immunizes employers from a lawsuit filed by an employee for a work injury or occupational disease. This is part of the trade-off under the workers’ compensation no-fault system. Removal of medical benefits as part of the benefit package under the workers’ compensation system could, through other legislation or interpretation of the exclusivity provision, erode or eliminate workers’ compensation as an exclusive remedy. Amendment 69 does not address exclusive remedy concerns.
The Employee Retirement Income Security Act (ERISA) is a federal statute that regulates private-sector, employer-sponsored benefit plans, including health care coverage. ERISA protections specifically supersede any and all state laws in so far as they may now or hereafter relate to any employee benefit plan. 29 U.S.C. 1144(a). Workers’ compensation is an exception to this preemption clause, meaning that states have the right to regulate workers’ compensation. Once medical benefits under workers’ compensation are integrated into a single payer system, medical benefits may no longer be offered for the purpose of complying with the workers’ compensation benefit package and may now be preempted by ERISA laws. There is no clear precedent over this issue and Amendment 69 is silent on this issue.
Treatment and Medical Impairment Under the Colorado Workers’ Compensation Act
Section 8-42-101, C.R.S. of the Colorado Workers’ Compensation Act requires every employer to supply certain medical benefits, including certain conditions for supplying those benefits given the nature of employment and the condition. Further, it identifies accreditation process as a requirement for a physician to provide primary care and to provide an evaluation for potential impairment of an injured worker. ColoradoCare would be the payer for work injuries. Amendment 69 is silent as to its overall effect on the Colorado Workers’ Compensation Act. Therefore, integration of the medical benefit component in the workers’ compensation system into ColoradoCare would likely require large-scale revision of the Colorado Worker’s Compensation Act, including revision of statutes and rules regarding physicians and determination of medical impairment.
Workers’ compensation laws differ from state to state. Currently, different state requirements and interpretations of when an injury or occupational disease is work-related creates risk for liability for uninsured loss for employers doing business in multiple jurisdictions. Integration of medical benefits into ColoradoCare compounds this problem. By its terms, a “member” is someone at least 18 years old, who has lived in Colorado as a primary resident for one continuous year. Colorado has one of the fastest-growing populations of any state in the country and many of those individuals are moving to Colorado for employment. If one of these individuals, 18 years old or older, is hurt at work but not a “member” of Colorado Care, that individual would not be eligible for medical coverage for a work injury. This would leave the employer obligated to fill the gap in coverage or be subject to penalties as an uninsured employer.
There is no provision in Amendment 69 for how existing claims would be integrated into ColoradoCare. ColoradoCare would simply assume responsibility for payment of medical benefits for injuries arising out of or within the course and scope of employment. This is a substantive change in the law and would be given prospective application. Therefore, integration of medical benefits into ColoradoCare creates a different payer, but is unclear as to what it does to the status of any existing medical care provider for any existing workers’ compensation claim.
Passage of Amendment 69 and the integration of medical benefits into ColoradoCare will spawn significant litigation over the issues identified above. This litigation would not be limited to hearings in the Office of Administrative Courts, but would involve District Court actions in both the state and federal systems over a myriad of potential situations. This litigation will be a significant cost to employers in Colorado and will potentially disrupt “… the quick and efficient delivery of disability and medical benefits to injured workers at a reasonable cost to employers.” Section 8-40-102, C.R.S.
The Initiative vs. Legislative Process
Initiative 20, (appearing on the 2016 Ballot as Amendment 69), is an example of Colorado’s flawed initiative process. Initiative 20 needed only 86,492 signatures to get on the Ballot, but received 158,831 signatures. This demonstrates the ease with which it got on the Ballot and a level of support for Amendment 69.
Amendment 69 is really in the form of a new statutory act. Ordinarily, such legislative proposals take the form of a bill with a legislative sponsor, committee assignment, public comment and discussion and debate that allows for amendment, etc., before it is passed and potentially enacted by signature of the Governor. Amendment 69 would never have appeared in ordinary legislative process as it appears on the Ballot. Instead, as an initiative, Amendment 69 is non-legislation that alters the Colorado Constitution through a simple popular vote.
The proponents of Amendment 69 spent a great deal of money getting it on the Ballot and may not have the resources to advocate further for its passage. Virtually all business organizations oppose Amendment 69 for reasons identified above. Further, former Democratic Governor Bill Ritter, and current Democratic Governor John Hickenlooper do not support Amendment 69. Very limited polling data shows stronger than expected support for this Amendment. In this unique election cycle, it is difficult to forecast whether or not this will pass since it is connected to the demographics of the people coming out to vote.