By

Dan Pilcher

CACI Senior Vice President

& Chief Operating Officer

Phone: 303.866-9600

E-Mail: dpilcher@COchamber.com

Friday, May 2, 2008

Hang On: Just a Few Days More for the 2008 Legislative Session . . .

Although the State Capitol grapevine had been for weeks carrying the prediction that the session would end today, it was not to be—the legislature simply has too many bills with which to deal.  It now appears that the General Assembly will adjourn on Tuesday instead, which is one day before the constitutionally mandated “sine die” adjournment on Wednesday.

Late Bill Targeting Real Estate Investment Trusts (REITs) Owned by Corporations Clears House and Moves to the Senate

HB-1408 is a “late bill” that was introduced April 22nd in the House by Representative Clair Levy (D-Boulder).  The fiscal notes states that the bill “establishes administrative and auditing measures to allow the Department of Revenue (DOR) to improve compliances with Colorado’s corporate income tax reporting requirements.”

On Second Reading on Wednesday, the House adopted an amendment offered by Assistant House Minority Leader David Balmer (R-Centennial), which had been suggested by CACI, that aligned the bill with Federal requirements for “reportable transactions.”  Eight Democratic Representatives joined the minority Republican Representatives to adopt the amendment.

The Democrats who “crossed the aisle” to vote with the Republicans for Representative Balmer’s amendment were: Joe Rice (Littleton), Alice Borodkin (Denver), Mary Hodge (Brighton), Cheri Jahn (Wheat Ridge), Debbie Stafford (Aurora), Karen Middleton (Aurora), Christine Scanlan (Dillon), Jerry Frangas (Denver) and Nancy Todd (Aurora).

CACI appreciates Representative Balmer’s willingness to not only offer the amendment but, as the Assistant House Minority Leader, to also work with members of the majority party to build a bipartisan coalition to successfully adopt the amendment.

Adoption of this amendment removed significant, discretionary authority contained in the introduced bill that would have given the DOR the power to determine what kinds of transactions taxpayers would have been required to provide to the DOR.  Granting such broad authority to the DOR deeply concerned CACI Tax Council members.  Joining CACI in the effort to have this amendment adopted were individual CACI Tax Council members, Xcel Energy and the Colorado Bankers Association.

In addition, Representative Levy agreed to another Second Reading amendment, suggested by CACI Tax Council members, that made the following technical changes to the bill, including:

1. Limiting the penalties to a one-time penalty for the taxpayer because the introduced bill would have allowed multiple penalties;

2. Clarifying how taxable income is attributed (the language of the introduced bill was written very broadly and could have been applied negatively against taxpayers--it also contradicted current law); and

3. Clarifying the applicability of the bill for the provision allowing promulgation of rules by CDOR. 

The House passed the bill on Third Reading yesterday and sent it to the Senate, where it has been assigned to the Senate Finance Committee, which is scheduled to hear the bill Monday morning at 8:30 a.m. in Senate Committee Room 354.  The Senate sponsor is Senator Jennifer Veiga (D-Denver).  For news coverage of the bill:

http://www.rockymountainnews.com/news/2008/apr/22/bill-targets-wal-mart-tax-evasion-scheme/

Speaker Romanoff’s “Bad Faith” Bill, Targeting Insurance Companies,

Heads to Senate Floor

This morning, the Senate Appropriations Committee endorsed HB-1407 on a party-line vote and sent it to the Senate Floor for Second Reading.  Yesterday afternoon, the Senate State, Veterans and Military Affairs Committee approved the bill on a party-line vote.  Senate Majority Leader Ken Gordon (D-Denver) is sponsoring the bill in the Senate.

The bill targets insurance companies when they make decisions on claims for benefits by policyholders.  HB-1407 increases fines and penalties, creates a private-cause-of-action for violations and authorizes recovery of attorneys’ fees and up to two times the actual damages.

CACI contract lobbyist Jim Tatten testified against the bill before the Senate State, Veterans and Military Affairs Committee yesterday, highlighting three major

problems:

• The scope of the bill, including definitions and standards;

• The private-right-of action, which allows any Colorado citizen to file suit against an insurance company for an alleged violation; and

• The fact that the bill may be crosswise with the federal ERISA law, which governs companies that have self-insured health plans.

The Committee added an amendment that removed life insurance companies from the bill’s targets.  However, health insurance companies, auto insurance companies, and homeowners’ insurance companies are still targets of the bill.  In the House, workers’ compensation insurers were removed from the bill.

CACI opposes the bill for a number of reasons, including:

• Health plans already have independent appeals processes in place that are reviewed regularly to ensure that the process is independent, impartial and fair. 

• HB-1407 prohibits use of binding arbitration agreements used by health plans that offer members a less costly, timely resolution of disputes.

Meanwhile, the U.S. Chamber of Commerce’s Institute for Legal Reform sent out an “Action Alert” about the bill.  Here’s what the Institute has to say:

New Trial Lawyer Bill Will Raise Your Insurance Costs

The Colorado Legislature is right now considering legislation (HB 1407) that would cause your insurance costs to skyrocket -- while padding the profits of wealthy trial lawyers by allowing them to file more unnecessary lawsuits.

Colorado insurance consumers currently have an implied covenant of "good faith" and "fair dealing" in their policies like that of other consumers throughout the country.

This bill would establish new causes of action and damages for purported "bad faith claims practices" notwithstanding existing protections in Colorado. 

H.B. 1407 would open up a floodgate of frivolous litigation, which translates to higher premiums paid by you, the consumer.

House Committee Kills New Business Personal Property Tax Bill

On Tuesday, the House Finance committee killed the new business personal property tax bill, HB-1413, on a party-line seven-to-four vote.  The Committee laid the bill over last Friday after a lengthy Committee hearing during which CACI Vice President of Governmental Affairs Donnah Moody testified in favor of the proposal.

The bill proposed to gradually eliminate fully-depreciated property from the liability of the local business personal property tax.  The bill was co-sponsored by Representative Kent Lambert (R-Colorado Springs) and Representative Joe Rice (D-Littleton).

The major stumbling block for the bill was the fiscal note, which projected a cost to the state of $2.7 million in fiscal year 2009-2010, $5.4 million the next year and $9 million the following year.  Under the Colorado School Finance Act, the state would have to backfill to local schools the business personal property tax revenue that the schools would forego if the bill became law.

Both the Colorado Municipal League and Colorado Counties, Inc., opposed the bill because it also would have cost local governments business personal property tax revenue.

Current law requires that fully depreciated business personal property continue to be reported for tax purposes.  The fiscal note states that “Under current procedures and in most cases, the actual value of fully depreciated property is equal to 15 percent of the new replacement cost of the equipment.”

CACI has long advocated the gradual elimination of fully-depreciated property as one of several incremental steps that can, and should, be taken to eventually eliminate the business personal property tax. 

SB-164 Finally Slips Beneath the Water in the House Judiciary Committee

The House Judiciary Committee has finally take action on SB-164, which would have loosened the damage limits for medical-malpractice claims.  Having heard testimony on the bill on March 12th, the Committee today voted to lay the bill over until May 9th--two day after the session must adjourn--at the request of the House sponsor, Assistant Majority Leader Terrance Carroll (D-Denver).

In other words, the Committee killed the bill.  Representative Carroll lacked the votes to pass the bill out of the Committee.  Two Democratic Representatives—Debbie Stafford of Aurora and Cheri Jahn of Wheat Ridge—had reservations about the bill.  Had the bill been brought up for a vote, the two Democrats might have joined the minority Republicans to stop the bill.

Although the Colorado Trial Lawyers Association promoted the bill, CACI and the following CACI members vigorously fought SB-164:

• Colorado Civil Justice League

• Colorado Hospital Association

• COPIC

CACI was concerned that the bill would:

• Increase health-care costs by driving up med-mal insurance premiums for physicians (the Colorado Medical Society estimates that premiums will increase 12 percent to 14 percent);

• Induce some doctors to end their practices or switch to less-risky medical specialties;

• Cause some doctors practicing “defensive medicine” by requiring expensive tests just to protect themselves against the possibility of lawsuits; and

• Negatively affect rural areas where there are fewer doctors if the bill causes some to end their practices.

A significant part of CACI’s effort on this bill involved engaging the business community across the state to weigh in with their opposition to the bill by activating CACI’s Grassroots Network.  CACI e-mailed two Grassroots Alerts to CACI members, local chambers of commerce that are CACI members and other business leaders across the state who have joined the CACI Grassroots Network and urged them to contact legislators and voice their opposition to the bill.

House Passes “Centennial Care Choices” Bill to Encourage Health-Insurance Companies to Develop “Value-Benefit Plans”

The House today gave Third Reading approval to SB-217, but the bill will return to the Senate for concurrence because the House added amendments to the Senate-approved version.

The bill’s main advocate is Senator Bob Hagedorn (D-Aurora).  Called the "Centennial Care Choices Program" bill, it asks the health-care insurers to tell the legislature what a so called “value-benefit plan” would look like and cost if the state required everyone to have health insurance.

The Steering Committee of the CACI HealthCare Council did not take a position on the bill.  The bill has generated considerable interest about its concepts.

While supporting provisions of the bill calling for the development of value-benefit plans by health insurers, the CACI Board of Directors would not support provisions that mandate every Coloradan to obtain health insurance and that call for a tax increase in 2010.

CACI-Endorsed Bill to Create Health-Insurance Cards to Reduce Administrative Costs Sent to Governor Ritter

On April 28th, the House gave final, Third Reading approval to SB-135, which would require health-insurance carriers that are regulated by Colorado to issue standardized cards that would carry information about an individual’s health-care coverage.  The bill goes to Governor Bill Ritter for his signature.

The bill was sponsored by Senator Shawn Mitchell (R-Broomfield).  The Steering Committee of the CACI HealthCare Council and the CACI Board of Directors supported the bill.

At the March meeting of the CACI Board of Directors, Senator Mitchell said the bill would reduce administrative overhead costs of health-insurance companies and medical-service providers.  He also said that the concept of a standardized card was a recommendation of the Blue Ribbon Commission on Health Care Reform.

CACI-Opposed Bill That Would Force Insurance Companies to Justify Rate Increases Moves through the Senate

Yesterday, the Senate Appropriations Committee passed HB-1389, which would require health insurance companies to justify rate increases before the Colorado Division of Insurance before they could go into effect.  The bill now moves to the Senate Floor for Second Reading.

The Division could deny rate increase requests based on such factors as insurance companies’ profitability, reserves, denied-claims record and administrative costs.

The bill has been amended to remove some provisions that the health-insurance companies objected to, such as allowing the Insurance Commissioner to use the “loss ratio,” the amount paid out in claims as a standard by which to deny a rate increase.

The bill’s House sponsor is Representative Morgan Carroll (D-Aurora); the Senate sponsor is Senator Paula Sandoval (D-Denver).

Jim Tatten, CACI’s contract lobbyist for health-care issues, testified against the bill before the House Business Affairs and Labor Committee and expressed concerns about administrative costs for insurance companies to comply with the bill, whether or not consumers would benefit from the transparency that the bill purports to shed on insurance companies and the potential negative impact of the bill on insurance markets and on the state’s business environment.  CACI President Chuck Berry also sent a letter to the members of the House Business Affairs and Labor Committee, urging them to oppose the bill.

Senate Gives Final Approval to Amended Single-Sales Factor Bill

The Senate today gave Third Reading approval to HB-1380, the single-sales factor bill.  Because of an amendment adopted in the Senate Finance Committee, however, the bill must return to the House for concurrence.

At its March meeting, the CACI Board of Directors adopted a neutral position on the single-sales factor bill based on the recommendation of the Single-Sales Factor Subcommittee of the CACI Tax Council because some members of the Subcommittee oppose the bill, some support and others remain neutral.

CACI worked with the Governor’s Office and the bill’s House and Senate sponsors to improve certain technical aspects of the bill.

For More Information on Legislation . . .

CACI members with questions about legislation that CACI opposes or supports should contact Chuck Berry, CACI President, at 303.866.9652 or e-mail him at: cberry@COchamber.com.

Questions pertaining to health-care bills should be directed to Ralph Pollock, Chair of the CACI HealthCare Council, at 303.866.9657 or via e-mail at:

ralph@apaccess.com.