A proposal that would increase regulatory oversight of insurers was approved by the House Business Affairs and Labor Committee on a 7-4, party-line vote, Thursday night.

House Bill 1139, sponsored by Rep. Morgan Carroll, D-Aurora, would give Colorado's insurance commissioner the right to approve or deny rate changes that insurance companies propose.

Carroll said the bill, titled the Fair & Accountable Insurance Rates (FAIR) Act, is intended to keep rising health care premiums in check by holding insurers accountable for their finances.

Carroll has said that skyrocketing rates force businesses and individuals to drop health care coverage and increase the number of uninsured people. She said 38 states already give their insurance commissioner prior approval of rate changes.

After hearing about five hours of testimony for and against HB 1139, the committee modified the bill so that it no longer applied to auto insurers.

The representatives also voted to reduce the reporting requirements for insurance carriers and tightened up definitions of when the commissioner could deny rate hikes.

But despite the changes, Michael Huotari, president of the Colorado Association of Health Plans, said his organization still opposes the legislation.

"This will still create more expensive regulation for the state and [the insurance] plans," Huotari said Friday morning. According to a fiscal note about the bill, it would add 6.4 full-time employees to the Colorado Division of Insurance staff at a cost of about $500,000 a year.

Huotari objects to a provision in the bill that identifies loss ratios -- the amount of money insurers pay out in claims -- as a standard that the insurance commissioner is required to consider when evaluating plans.

"The loss ratio is not a good metric to use," Huotari said. "It doesn't say anything about the efficiency and quality of care."

Huotari and others in the insurance industry say FAIR unfairly targets health insurance as the cause of rising health costs. Bill opponents say rising health care premiums are a mere reflection of what medical care costs. The also say increased regulation will slow down carriers' ability to respond to market trends and the economy.

The bill heads to the House Appropriations Committee. If approved, it will go to the House, where 30 of the chamber's 65 members are sponsors of the legislation. Two Democrats not listed as sponsors voted to advance the bill on Thursday night.

---------------------------------------------------------------------------------------------

© American City Business Journals Inc. All rights reserved.