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Premium issues: rising insurance rates ripe for legislative action.

OPENED A STATEMENT FROM YOUR INSURANCE COMPANY OR YOUR EMPLOYER'S HUMAN-RESOURCES/BENEFITS DEPARTMENT LATELY?

IF NOT, BE PREPARED FOR STICKER SHOCK.

WHETHER IT'S HOME, AUTO OR HEALTH INSURANCE, PREMIUM COSTS IN COLORADO ARE RISING FASTER THAN THE NATIONAL AVERAGES. THAT MEANS A GREATER CHUNK OF YOUR MONTHLY PAYCHECK WILL BE PAYING FOR 10 PERCENT TO 20 PERCENT RATE INCREASES FOR INSURANCE COVERAGE IN 2003.

COME JANUARY, THE LEGISLATURE MUST DECIDE WHAT TO DO WITH A FAULTY NO-FAULT AUTO INSURANCE LAW THAT EXPIRES IN JULY, AND HOW TO BRING SOME MEASURE OF AFFORDABILITY TO health insurance in today's sluggish economy, with many people out of work.

Today "a lot of people have to choose between food on the table and auto insurance or health-care premiums," says Bill Thiebaut, a Pueblo Democrat who was last year's senate majority leader and who ran unsuccessfully for lieutenant governor last month.

During the past year, about 85,000 Coloradans have lost health insurance because their employers can no longer afford to offer the full coverage mandated by state law.

The insurance industry says its rates have been too low previously, but they were offset by profits in the stock market. Given the market's lackluster performance, the industry now is asking customers to pay their own way through higher premiums.

In some states, regulators set insurance rates. Ordered by Texas to cut its homeowners' premiums even though it was losing money Farmers Insurance Group opted to stop writing insurance there. State Farm is pulling out of New Jersey's auto insurance market for the same reason.

Colorado is a "file and use" state. A company files a notice of rate changes with the state for review Unless something's really out of whack, the company can charge whatever it thinks the market will bear.

The Division of Insurance is getting more calls from consumers than ever before, says spokeswoman Deborah Collette. The agency's primary legislative concern is to ensure that the law under which it operates is extended beyond its current sunset deadline of July 2004.

Thiebaut hopes the legislature will give the state insurance commission some teeth to make insurers justify their rate increases before they are put into effect. He also would like to see a consumer advocacy program, similar to that for utilities.

While lawmakers, lobbyists and consumers might not agree on what approach to take, the rules under which the insurance industry operates in Colorado are ripe for revision.

"Insurance is becoming too expensive for many and unaffordable for many others," says Carole Walker, executive director of the Rocky Mountain Insurance Information Association, an industry group.

AUTO INSURANCE

Colorado auto insurance rates have risen by about 20 percent, about twice the national rate. That means the average policy costing about $750 a year per vehicle is now up to about $900.

The number of auto claims isn't up. The cost per claim is. More expensive vehicles cost more to repair. However, the No. 1 problem for auto rates is the cost of Personal Injury Protection (PIP), medical coverage mandated by law.

State Farm, one of Colorado's largest insurers, raised its rates twice in 2002.

"The cost of PIP coverage alone went up 66 percent this year," says Joy Pickar, State Farm's government relations director in Greeley.

Colorado's no-fault insurance law has undergone 10 major revisions since 1974. Pure no-fault seems like a good idea, but Colorado's lawmakers have made so many changes that today's law no longer resembles the 1974 version, Walker says.

No-fault originally was designed to hold down the cost of insurance by reducing the need to recover damages from an at-fault party The current law mandates at least $130,000 in medical coverage. Unlike regular health insurance, an insurer must pay 100 percent of all reasonable costs, including charges for treatments like aromatherapy and massage therapy not normally covered by conventional health-care policies.

The insurance industry wants to offer consumers options that vary the amount of medical insurance to be included and what it will cover. The industry also wants PIP coverage to more closely resemble conventional health insurance. And it wants to raise the threshold that lets injured parties sue for pain and suffering once medical payments have topped $2,500. That's something that no-fault was designed to prevent.

Gov. Bill Owens is telling legislators to do a major overhaul of the no-fault law or let the law die, says spokesman Dan Hopkins, In that case, Colorado would join 37 other states where tort rules apply.

"At this point, you've got a 50-50 chance of that happening," says Rep. Laurie Clapp (R-Centennial) and chairwoman of the House Health, Environment, Welfare and Institutions committee.

Thiebaut says many legislators are concerned that a return to the tort system, where injured parties and their insurance companies often have to sue to recover damages, would clog the courts and result in outrageous verdicts. "I don't think no-fault will go away" he says.

HEALTH INSURANCE

Colorado's health insurance crisis is caused by the same problems seen across the country -- higher prescription costs, an aging population, increased demand for the latest high-cost technology.

Tim Jackson, executive director for the Colorado chapter of the National Federation of Independent Business, says it appears companies are passing health-insurance rate hikes on to their employees rather than boosting their own prices in the fragile economy.

A new NFIB study found 67 percent of businesses are increasing deductibles, co-pays or employee contributions to health-insurance plans. Or, "they're decreasing coverage, delaying benefits or changing plans or dropping coverage altogether," says Jackson.

Jim Noon at Centennial Container Corp. says the Denver company has paid the full cost of health insurance for his 12 employees and one dependent for 17 years. After insurance premiums tripled during the past four years, Noon opted to stop paying for dependent coverage. Employees with one dependent now pay $300 a month. Those with families were paying about $200 a month. Now that's jumped to more than $500.

Employers who can no longer afford to support children under employee benefits should be advising workers about state programs such as Children's Health Plan Plus, health experts say It covers more than 43,600 children, and applications are growing each month. Families can qualify if their income is less than 185 percent of federal poverty levels. A family of four can qualify with a monthly income of less than $2,790 or $33,480 a year.

Gov. Owens will be backing legislation in 2003 that allows companies to offer basic health-care packages with less coverage than is now mandated, says Hopkins. A similar package failed to win approval in 2002, but it was a good start, said the governor's spokesman.

HOMEOWNER INSURANCE

The decision by some insurance companies to temporarily stop writing homeowner policies in Colorado because of wildfires snared headlines last summer, but industry officials say fires aren't the driving force behind the 10 percent-plus increases in rates.

Wind and hail, which caused nearly $2 billion in damage during the past decade, are the big problems in Colorado, according to the Rocky Mountain Insurance Information Association. Rising building costs for repairs are another factor.

Still, some major insurers, like State Farm, are scaling back their Colorado presence by limiting the amount of new coverage they will write because they aren't making a profit.

"Obviously when the largest insurer starts slowing down its growth, there is an effect," says State Farm's Joy Pickar. "Simply because State Farm isn't growing as fast as in the past ... there are still lots of insurers who are writing homeowner's insurance."

Homeowner's coverage isn't required by state law, but it is by most mortgage lenders. Costs vary depending on the amount of coverage and deductibles.
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Author:Stokes, Jeanie
Publication:ColoradoBiz
Geographic Code:1USA
Date:Dec 1, 2002
Words:1279
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