Colorado faces insurance crisis

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GLENWOOD SPRINGS, Colo. (AP) - David Malehorn has become an accidental expert on health insurance in rural Colorado, where a crisis is forcing thousands to go without coverage and thousands more to do everything possible to keep it.

Malehorn's wife has multiple sclerosis; his daughter has epilepsy, and he employs 11 insured people at Professional Auto Body and Frame Inc. He pays about $4,700 per month for health insurance for all, due in part to his family's illnesses.

Malehorn has changed health-insurance plans and increased deductibles and co-payments for drugs and doctor visits in an attempt to keep control over skyrocketing premiums.

"Are the employees unhappy? Yes. But they realize I'm paying through the nose for this and I'm the only body shop in the area that offers health insurance," he said.

Malehorn's struggle is a stark sign of a growing health-care crisis that has the industry, lawmakers and residents worried. It may result in a special legislative session if lawmakers fail to craft a solution before they recess May 9.

In recent years, insurance premiums have soared in rural areas. Industry officials point to inflation in drug prices and the increasing cost of medical treatment. There also is a maze of complicated state regulations that have a disproportionately large effect on rural areas because they affect coverage for small businesses more than any other consumer.

"Every component of the system is stressed to the max now, consumers, physicians and carriers," Susan Gambrill, special assistant to the state insurance commissioner, said.

In Garfield, Pitkin and Eagle counties, there is just a single insurance company offering coverage with in-network access to physicians.

Since January 1999, 23 small-group insurance carriers have left the market, citing financial losses, mergers, regulatory difficulties and business conditions. Others have won or are seeking state permission to leave, according to state Division of Insurance records.

For the first time since the division began collecting data in 1995, it reported a decline in the number of people insured in small-group plans in 1999. The figures for 2000 are not final, but Gambrill said they will show further decline.

"The only thing worse than delivering high rates to clients is telling a client they have no more insurance options," said James Scholl, a Denver insurance broker. "If there was one thing that we thought would fix it, we'd have found it already."

Beginning Tuesday, PacifiCare, the largest insurance provider in the state, plans to stop offering coverage in 15 mostly rural counties because of mounting financial losses.

Humana-Employers Health Insurance has received state permission to stop serving 21 counties, but its request to leave Garfield, Pitkin and Eagle counties was rejected.

"All HMOs in Colorado have stumbled and had financial losses that they had to figure out a solution to and get back on a more financially stable basis," said PacifiCare Chief Executive Officer Val Dean.

Today, fewer than 20 insurance companies are active in Colorado, about one-quarter the number in 1994, and only a few are active in rural areas, Scholl said.

At the heart of the problem is insurance for employee groups of one to 50 people, which are treated differently under the law than larger groups that are largely unaffected by state regulations.

Small groups are required to accept people regardless of pre-existing health problems and to include coverage for various preventive screenings and other medical procedures.

Companies also face problems delivering cost-efficient care in sparsely populated areas because there are fewer clients to finance the risk and cost of medical catastrophe. In addition, it's more difficult to establish a network of health-care providers because of a lack of competition.

Lawmakers are working on several bills that include provisions to make it easier for insurers to set up health-provider networks, to allow insurance companies more flexibility in setting premiums for "business groups of one," and to allow health providers to set up their own networks.

Malehorn is skeptical lawmakers will provide real solutions. "We're down to one insurance company," he said. "When does it become a real priority?"

"There's no magic bullet," Mary Ellen Waggoner, deputy state insurance commissioner, said. "The issues are not unique to Colorado, but the situation here is exacerbated because of the large rural areas and because of unrealistic consumer expectations."k

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