In an election year in which former outsider candidates Donald Trump and Bernie Sanders have ridden voter anger to the verge of presidential possibility, could voter disgust with the healthcare status quo result in a landmark victory for single-payer advocates and the beginning of the possible demise of benefits brokers?

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The little-noticed initiative has major implications for insurance brokers nationwide.

The amendment calls for a new 10% payroll tax, with employers paying 6.67% and employees 3.33%, to raise $25 billion a year.

Virtually every business organization in the state opposes the measure, but voters could be in the mood to start over.

 

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ColoradoCare

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A little-noticed ballot initiative in Colorado has major implications for insurance brokers throughout the country. Voters in the Mile High State will decide in November whether to amend the state’s constitution to dump Obamacare and create a single-payer healthcare system.

While some in the Colorado business community were surprised by the success of the petition drive, others note a sea change in U.S. politics and wonder if the time is ripe for radical changes.

“It is a wild year,” says Eric Sondermann, a noted political analyst in Colorado. “Aberrant in many respects. Unpredictable in many respects, and that unpredictability should be sobering to any operator. What’s fueling a lot of this is voter anger and alienation of a substantial magnitude. A huge chunk of that anger and alienation is coming from the political left. Obviously, Bernie Sanders is the candidate for them, and Amendment 69 is going to be attractive for many of them.”

The amendment calls for a new 10% payroll tax, with employers paying 6.67% and employees 3.33%, to raise $25 billion a year to fund the new system, to be known as ColoradoCare. It also includes a 10% tax on non-payroll income. Critical to the new endeavor is the assumption that ColoradoCare would qualify for a Section 1332 waiver from the Affordable Care Act, which would enable ColoradoCare to receive $11.6 billion a year for administering the Medicaid program and ensuring Coloradans have coverage that is comparable to what they would have received under Obamacare.

The amendment is opposed by virtually every business organization in the state, but political observers warn that voters could be in the mood to throw everything out and start over.

“I think people need to take this effort a lot more seriously than a lot of organizations are,” says Kelly Sloan, a public affairs and communications consultant based in Grand Junction, Colo. “This is a different year. We’re seeing on the national stage a lot of appetite for change. People don’t like the status quo; they want something radical. We passed a constitutional measure to legalize marijuana in the state of Colorado, so radical measures have passed in Colorado before, and we’re in a year that is conducive to that.

“This is just what you are seeing with the mood of the country and why Donald Trump is doing so well and Bernie Sanders is doing relatively well. It captures that mood that permeates voters, that they don’t like the status quo; they are ready for something different. This whole anti-establishment mentality seems to be pretty pervasive on both sides of the political spectrum.”

“What I see happening,” says Bill Lindsay, Lockton employee benefits president, “is a lot of smaller, rural hospitals and a lot of independent doctors being forced out of business because they can’t afford what they are going to be reimbursed under the system.”

Then there are the taxpayers. The $25 billion a year for healthcare called for in the initiative would be in addition to Colorado’s current $25 billion budget for all state services.

Our track record of voters that make uninformed decisions based on limited information is pretty well known.

Bill Lindsay, employee benefits president, Lockton

“It’s costly—a $25 billion tax increase which would essentially double the current state budget,” says Kendra Johnson, benefits consultant with Flood and Peterson. “There are no checks and balances. If the $25 billion tax increase isn’t working, guess what they can do? They can go ahead and increase taxes more.”

Johnson, who specializes in healthcare reform and has extensive involvement with the local and statewide divisions of the National Association of Health Underwriters, is referring to the fact that the board running the system initially would be political appointees determined by the governor and leaders of both parties.

Within three years, however, voters in Colorado’s seven districts would elect three members per district, creating a 21-member board that would negotiate directly with pharmaceutical companies and healthcare providers for services. The board would not be subject to Colorado’s Taxpayer Bill of Rights, a constitutional amendment adopted in Colorado in 1992 to limit the amount of revenue the state can collect under existing tax rates without voter approval. By sidestepping TABOR, ColoradoCare would be able to increase taxes without first getting voter approval.

The new system would have no deductibles or co-pays and would provide the equivalent of Obamacare’s platinum level plans.

“There are just a lot of red flags in there,” says Johnson. “Vermont tried this, and it practically bankrupted the state. We’ve already shown that this can’t work at a state level.”

Yet, she says, many businesses fear the amendment has a good chance of passing. “If you’re dealing with a younger population, let’s say 18 to 29, who don’t necessarily understand the history of healthcare, this may seem simple to them,” she says. “It’s a tax, I just do this, I go here, it’s easy. Sign me up. That demographic will think this is a very good thing, and they do get out and vote.”

What’s particularly scary, Johnson notes, is that it’s a constitutional amendment, designed to be difficult to amend or repeal, which is pretty risky for an experimental healthcare system. Matt Coleman, president of the Colorado market at Hub International Insurance Services, calls the effort an expensive roll of the dice.

“With the stroke of a pen or the finish of a ballot, we are literally creating something that is equal to the size of the entire state budget of Colorado and is an experiment,” Coleman says. “There is no history of success. There is no model to look to that informs that this can be successful. This is a $25 billion roll of the dice.”

How We Got Here

The primary driver behind the amendment is Democratic state senator Irene Aguilar, a practicing physician at Denver’s Westside Family Health Center since 1989 and a member of the Colorado state Senate since 2011. She has been advocating healthcare reform in Colorado since working on a statewide committee in 2007 that studied such reform.

“My take after four years in the legislature was that the politics around healthcare are such that it was going to be impossible to get bipartisan support to fix the healthcare system in the state of Colorado and that we would need to go directly to the people, where health, disease and disability are nonpartisan,” says Aguilar. “I decided that I really want this to be a nonpartisan conversation, because as soon as you get a bunch of people from one party on one side and a bunch from another party on the other side, it becomes political. I want this to be a conversation of the people.”

Another staunch advocate of the system is T.R. Reid, a best-selling author on healthcare systems and a documentary filmmaker who lives in Colorado. Reid, whose 2009 book The Healing of America became a national best-seller, is a former foreign correspondent for The Washington Post and contributor to NPR’s “Morning Edition.” He has made documentary films for National Geographic Television, PBS and the A&E Network.

“I’ve been arguing since 2010 that the United States should provide healthcare for everybody,” Reid says. “We’ve got to do this. The United States has to reach the point where everybody has healthcare. We’re the only industrialized democracy that doesn’t provide healthcare for everybody, and the result is we spend twice as much as all the other rich democracies and get much less in return.”

Is Colorado a beachhead for single payer?

“We believe we are a test case for what is a much bigger national discussion about single payer,” Coleman says. Reid agrees he’d like to see the Colorado experiment become a movement that spreads to other states.

“Not only will we do a service for our state by providing healthcare for everybody, we’ll do a service for the country by demonstrating we can provide healthcare for everybody at reasonable cost,” Reid says. “My thought is when we make it work, other states will see it and then they will copy it. Colorado will be the model other states will follow. If you look at marijuana, we were first for recreational marijuana, and now it’s on six more state ballots in November. When we come up with an idea that works, other states copy it.”

Aguilar, however, has a different view. While she can see other states watching Colorado closely to see if it succeeds, she doubts the ColoradoCare model would ever be adopted nationally.

“One of the interesting things about the United States is that every state has its own personality and its own way of doing things,” Aguilar says. “I can’t see that something that would work in Colorado would necessarily translate and work in other states. There will be states that will never go there. We have states that haven’t expanded Medicaid. What chance is there that they would even look at something like this?”

Impressive Opposition

Virtually every business association in Colorado opposes the amendment. Among them: the Colorado Association of Commerce and Industry, the Colorado Hospital Association, the Colorado Business Roundtable, the Colorado Black Chamber of Commerce, the Colorado Association of Health Underwriters, the Denver Metro Chamber of Commerce, and the Metro Denver Economic Development Corporation.

We’re reaching a point in Colorado where 95% of Coloradans are insured. We’ve made pretty darn good progress, and it begs the question, ‘Why aren’t we celebrating that instead of trying to blow it up?

Matt Coleman, president of the Colorado market, Hub International Insurance Services

The Council also recently joined the opposition amid a flurry of attacks on the employer-provided benefits market on a national scale. While The Council notes the amendment threatens to completely dissolve employer-provided health benefits in Colorado, it also details other potentially damaging effects. “There would be a loss of health care industry jobs as providers would look elsewhere to do business, there would be a displacement of competitive private-market insurance solutions and business owners would be hit by 10 % in new employment taxes plus an additional 10 % tax on all non-payroll income,” The Council said in a statement.

“Every Colorado consumer receiving employer-sponsored health insurance would lose their current coverage, and the market for workers compensation policies that drive employment safety policies and procedures could go by the wayside, too,” says Ken Crerar, president and CEO of The Council. “Our decision to become involved was made clear after a unanimous vote by our Board. We hope this is a start in helping to highlight the devastating impact ColoradoCare would have on the market, and we’re encouraging all of our members across the country to be informed about it. This is not just a Colorado problem.”

Linda Gorman, director of the Health Care Policy Institute at the Independence Institute, a free-market think tank in Denver, says research shows single-payer systems don’t work.

“Decades of evaluations of existing centrally planned monopoly healthcare programs show their costs are poorly controlled, they have long waiting lists for even basic care, limit access to new drugs, have miserable quality and discourage new discoveries,” she says.

Perhaps the most impressive opposition group is a bipartisan group of business, civic and community leaders calling itself Coloradans for Coloradans. Denver Metro Chamber of Commerce President and CEO Kelly Brough is co-chairperson of Coloradans for Coloradans’ campaign to defeat the amendment.

“We don’t want to risk our access to quality healthcare, our income and our state’s economy on this experiment,” she says.

Coleman cites several Colorado healthcare statistics as evidence that residents ought to be cheering and not trying to do away with the current system.

“It’s worth asking the question, why are we doing this?” he says. “One of the main arguments for getting into the Affordable Care Act and changing how we approach health insurance was to reduce the roll of the uninsured. If you look at Colorado in the last three years, our uninsured rate has gone from 15.6% to 6.7%. We’re reaching a point in Colorado where 95% of Coloradans are insured. We’ve made pretty darn good progress, and it begs the question, ‘Why aren’t we celebrating that instead of trying to blow it up?’”

And in the Kaiser Family Foundation’s most recent ranking of per capita health spending, Colorado’s $5,994 per capita was the sixth-lowest in the nation.

“We’re in the lowest six states in the country, and this is a list you want to be at the bottom of,” Coleman says. “Again, what’s the problem that we’re trying to solve? We’re a state that is known for being healthy and having an outdoor lifestyle. Isn’t that something that we should be patting ourselves on the back for? These are really good indicators.”

But more than 150,000 Coloradans signed petitions in 2015 to force the issue onto the ballot. Coleman believes it stems from dissatisfaction with the ACA and the rising cost of health insurance.

“People generally are confused by the Affordable Care Act, and they are generally unhappy with the cost of their health insurance, so they are looking for solutions,” says Coleman. “The argument I hear coming back is some flavor of, ‘We’re upset about the cost of insurance and we’ve finally reached a point where we just need to blow up what we have and start over with a blank sheet of paper, because what we have today isn’t working.’ That leverages people’s anger about the current system or frustration about insurance rates, or it leverages their lack of knowledge about some of the facts about Colorado.”

Sorting out the Politics

Some opponents argue that people who signed the petitions were misled, that they thought they were being asked if they wanted to get rid of the Affordable Care Act, but they were not told the petition they signed actually called for a single-payer system.

“The petition gathering was somewhat sneaky,” Sloan says. “They were going down to typically Republican areas like Colorado Springs and advertising it as something that replaces Obamacare. You’re going to see this in their campaign in some of the more Republican areas of the state. Was it sneaky? Sure. Is it legal? Yes. Was it smart on their part? Yes.”

Sondermann says he doesn’t believe Republicans will be confused enough to choose a single-payer system over the Affordable Care Act.

“I don’t think the preponderance of Republican voters are going to be terribly attracted to Amendment 69 because of their objections to Obamacare,” says Sondermann. “This is Obamacare on heavy steroids. I see that as a substantial political threat.

“I think the opposition to Amendment 69 is significantly funded by various industry interests and they will have no shortage of resources to get that message out. I think Amendment 69 will get labeled as state-run healthcare and that name will not be a flattering name.”

Leaders on both sides of the campaign say the debate could attract national attention—and money—in the coming months.

“There is money coming in on both sides,” Sloan says. “There is a campaign against it being run by the Denver Metro Chamber, and they’ve hired a fairly powerful public affairs firm. As for evidence of spending, we haven’t seen a whole lot yet. The proponents are putting some money out. They have a fantastic website. They have done a very good job on their website of being updated, everything is fresh, so they’ve spent some money on that. They have T.R. Reid and Sen. Aguilar going around the state to speaking engagements and town halls. They are putting a little bit of money into that. We haven’t seen much in the way of advertising. That’s going to come later.”

This is Obamacare on heavy steroids. I see that as a substantial political threat.

Eric Sondermann, political analyst

An advocacy group, ColoradoCareYes, raised nearly $330,000 in 2015, according to a filing with the Colorado Secretary of State’s office, and is believed to have spent a considerable part of that on the petition drive.

“It doesn’t appear they have a lot of funding for things like advertising,” Lindsay says. “That surprises me. I would expect that liberal forces in California and others would be flooding money in because this is a beachhead for single payer and they want to test it here.”

“I wish,” responds Reid to the notion of Hollywood money. “I’d take it. We’re trying to raise money all around the country, there’s no question. We’d like to, but so far we don’t. I’d love to have Hollywood money. I’d love to have Canton, Ohio, money, or Mobile, Alabama. I’ll take money from anybody, and if we had the money to explain our program, we’d win.”

Reid says he believes the insurance industry alone will spend up to $5 million in Colorado to defeat the amendment (though no opposition groups reported raising any money in 2015 and the next filing deadline was just before Leader’s Edge went to press).

Sondermann says the financial rhetoric is misplaced. “Both sides are probably crying wolf a little bit,” he says. “There will be outside money on both sides. I don’t see either side being underfunded here, especially the opposition side. I think the opposition side may at some point have to make a decision about what magnitude of resources they want to devote to this. The question is, ‘Do you want to buy a victory, or do you want to buy a landslide?’

ACA Waiver Makes It Possible

The Affordable Care Act gives states the option of creating their own healthcare exchange or being part of the federal exchange. It also contains language saying states can receive a waiver from ACA requirements, as long as they demonstrate their alternative plan coverage offers at least the same amount of benefits to at least as many people who would have been covered under the ACA. They must also demonstrate it will not increase the federal deficit for the next decade. The first year the waivers are available is 2017, although ColoradoCare wouldn’t be inaugurated until 2019.

ColoradoCare advocates say under their system Colorado residents and employers would pay $26.7 billion in the first year of the program in premiums and out-of-pocket expenses for the services typically covered by comprehensive health and dental insurance—$4.5 billion less than the $31.2 billion cost with the current system.

“The only way you can call it a tax increase is to ignore what Coloradans are spending now because we’re spending more than that for healthcare,” Reid says. “It is a $25 billion tax increase, but it saves money because we’re now spending $30 billion on health insurance premiums and those premiums have been going up at about 10 to 15 times the rate of inflation. Compared to that, we’re saving money. As I said to the state treasurer, don’t you know that 25 is less than 30? It’s the smartest $25 billion we ever spent, because we’re saving money. We’re getting better product for less money.”

ColoradoCare critics note the only economic impact study done to date was prepared by the Colorado Foundation for Universal Health Care, for which Reid is the board chair. The 12-page study lists what would be covered under ColoradoCare but offers no detail about how, or how much, providers would be reimbursed. It says ColoradoCare would save taxpayers $5 billion in 2019 but does not include projections for anything beyond year one. Critics say a 12-page business plan for a $25 billion enterprise is insufficient.

While the idea of voters anywhere approving a 10% tax hike seems far-fetched, industry insiders are worried. Lockton’s Lindsay is one of the state’s preeminent healthcare authorities, having chaired two statewide commissions on healthcare and healthcare reform. He is a former chairman and current board member of the world-renowned Craig Hospital in Denver and a former chairman of the National Small Business Association. He describes the election as too close to call.

“Many have dismissed this, particularly in our industry, as something that’s a harebrained idea that won’t pass, and I think that’s really dangerous and really naïve,” Lindsay says. “Look at the state that legalized marijuana. Our track record of voters that make uninformed decisions based on limited information is pretty well known. I think it has an excellent chance. I would give it at least a 50% chance. It would be very easy for them to run an ad that says, ‘If you vote against Amendment 69, you are voting in favor of Obamacare and voting in favor of insurance companies.’ There are an awful lot of people who just hate insurance companies and are frustrated with Obamacare and would vote for this without knowing anything else.

“You’ve got to remember that businesses don’t vote, and although business takes it in the shorts with this new tax, for employees, 3.33% of payroll is less than what many of them pay today. This is a presidential election, so the turnout of uninformed voters has the potential to be high. The only detriment they have is the veracity and viability of their arguments. I think if the supply side gets a chance to explain it to the population in a way they can understand, I think that will help a lot.”

An Economic and Innovation Buzzkill?

Reed Smith, senior vice president and employee benefits practice leader at CoBiz Insurance, says Colorado is known for its innovation, but he worries that voters won’t think this one all the way through.

“I love the fact that we are an innovative state. We’ve got a lot of technology happening here. A lot of great entrepreneurs. I don’t mean I want to stifle innovation in our state, but I think we need to be careful that doing this sort of stuff and bringing in more big government long term stifles our innovation.”

He points to employee benefits plans as an example. “The lack of innovation and competition this would create for things like employee benefits plans is alarming,” he says. “Let’s say you’ve got a company that has invested in wellness or consumer-driven health plans and a very intentional design around contributions. The way the amendment is written right now, that all goes away. This is a 10% tax, and now you get what is created by this board, regardless of what internal health or wellness strategy you may have had at a corporate benefit level.

“In a socialized medicine plan like this, what are the incentives to invest in wellness and health improvement? What are the incentives for the doctors and hospitals to be innovative and focus on value and outcomes? If all of a sudden our healthcare inflation rate starts to spike, the only options are they raise the tax or they slash the benefits.”

Lindsay says ColoradoCare could result in doctors and other providers leaving rural areas for places where their compensation is higher.

“The only way initiatives of this type are effective in lowering costs is through global budgeting,” Lindsay says. “The state of Colorado would establish a budget for all healthcare and determine how much it would pay doctors and hospitals and no longer would there be negotiation by providers.” As he noted earlier, that inability to negotiate reimbursements could force many providers out of business in Colorado. “The medical infrastructure will be significantly weakened,” he says.

The problem in Vermont is the vision people had was of this homogenous thing called single payer, and because that discussion of ‘what exactly are we talking about’ didn’t happen, it was a very confusing dialogue.

Al Gobeille, chairman, Green Mountain Care Board 

Some provider advocates point to Medicaid as an example of what to expect if the state broadens its role in setting payment rates for medical services. Chronic Medicaid underpayment to hospitals and doctors leads to access issues for patients. The state could face continuous pressure to either raise taxes or ratchet down on provider payments so it doesn’t have to cut benefits.

Aguilar says ColoradoCare will cost less because it reduces bureaucracy. With only one payer, she says, providers won’t need to spend as much time and effort on administrative costs.

Responds Lindsay: “This feels exactly like what happened when Medicare was first created. The initial cost projections were way, way understated.

“They have not properly estimated what it’s going to cost them to build an infrastructure,” he says. “The state of Colorado right now does not have an infrastructure to handle enrollment, ID cards, proof of insurance, collecting these additional tax dollars, etc. They don’t have that in place right now to the degree that would be required under this law.”

Matt Coleman raises one of the lesser-talked-about pieces of the legislation: the medical portion of workers compensation will also be included in ColoradoCare. In addition to working in Hub’s Colorado market, Coleman has spent 30 years in economic development. These days he’s also the chairman of the board of the Colorado Springs Regional Business Alliance, an amalgamation of the Chamber of Commerce and the Economic Development Corporation.

“The irony is that Colorado has among the lowest and most stable workers compensation insurance rates in the country. As an economic development guy, I can say it is quickly one of the positive discussions we have with employers about why they’d want to relocate here, because we have a stable, low-cost environment. With all the noise about health insurance, people are ignoring what is a core business issue on workers compensation insurance.

“I refer to it as the ultimate economic development buzzkill. I cannot think of any more negative message than, ‘Would you like to move to Colorado, where we just funded the largest tax increase in the state’s history to create an undefined $25 billion industry to control your health insurance and workers compensation?’ That’s beyond careless—it’s reckless.”

What Happened in Vermont

The most recent attempt to create a single-payer, government-run healthcare system was in Vermont in 2011, when that state’s legislature created the Green Mountain Care Board and charged it with determining how to adopt single payer in Vermont, among other duties. After three years of trying to make it work, Gov. Peter Shumlin announced in late 2014 that single payer would be too costly in Vermont.

According to the governor, Vermont’s system would have required an extra $2.6 billion more than the state’s $1.7 billion in tax revenue.

“The number one lesson I learned was that single payer is a magic mirror and people will see in those words all their hopes and all their fears,” says Al Gobeille, chairman of the Green Mountain Care Board. “If you can’t have a very thoughtful conversation on what you mean by that, no progress will be made. The problem in Vermont is the vision people had was of this homogenous thing called single payer and, because that discussion of ‘what exactly are we talking about’ didn’t happen, it was a very confusing dialogue. This is really crucial.

“If you say, ‘How can we take Obamacare and Medicaid and actually make something that works for the small group and individual market and the Medicaid folks that is seamless and helps with the co-pays and deductibles,’ you can do that. If you try to take over the whole system, that’s a pretty big lift. But nationally the rhetoric is,

‘Take over the whole system. Incrementalism isn’t bold enough.’”

As did the ill-fated Vermont plan, the Colorado proposal calls for platinum-level healthcare services—the highest level available under Obamacare. Under ColoradoCare, policyholders would be responsible for 10% of doctor visits and other healthcare costs through deductibles and co-pays, with their insurance company paying the remainder. Under Obamacare, by comparison, gold-level patients pay 20% of the costs, silver-level patients pay 30% and bronze-level patients pay 40%.

But no matter the amount state voters think they are going to pay, if they approve the ballot initiative, they may be paying a much higher price than they ever imagined.