A major health-insurance organization has decided to pull out of the small-group provider market in rural Colorado, including Montezuma County, leaving thousands of employees statewide without medical coverage.

Managed-care plans run by Humana-Employers Health Insurance in 24 rural Colorado counties, more than a third of the state, would expire under the proposal once current contracts are up, said Mark Mathis, a Humana spokesperson.

The decision still needs approval from the Colorado Division of Insurance and its commissioner, Bill Kirven. If the pullout is allowed, Humana plans to discontinue offering its preferred-provider organization (PPO) on April 1. Humana will still offer traditional insurance coverage in those counties, but not a network system that offers more-affordable premiums.

The reasons given by Humana during a telephone press conference Tuesday were economic and regulatory. The low number of hospitals in rural areas makes it difficult for PPO insurance networks to be successfully negotiated because the limited competition does not provide incentive for organizations to accept the low-premium contracts needed to attract customers.

"Rural hospitals are in a position to negotiate for higher premiums because of the limited market, one of many factors that led to us losing $40 million in Colorado’s small-group market in the last two years," Mathis said.

And, under Colorado insurance laws, small-group plans such as PPO’s cannot vary premiums based on individual health risks, causing customers to switch to so-called indemnity or traditional insurance plans that allow premium rates to go down based on good, or improving health.

"We end up with high-need patients, which runs up our costs, and that translates to higher premiums that are unaffordable," Mathis said. "It is a devastating spiral for rural markets that needs to be dealt with in legislation so that these networks can adjust premiums and compete, because right now our care costs are too high for what we collect."

The change would affect 22,000 PPO health-plan members in Baca, Bent, Chafee, Cheyenne, Conejos, Costilla, Eagle, Garfield, Jackson, Kiowa, Kit Carson, La Plata, Lake, Las Animas, Lincoln, Moffat, Montezuma, Park, Phillips, Pitkin, Prowers, Rio Blanco, Washington and Yuma counties.

In Montezuma County, Mathis said, 41 businesses or organizations utilize the Humana PPO network plan, which provides coverage for 322 individuals whose employers are now faced with obtaining new employee insurance.

"We heard about it this morning and basically there was a sense of panic," said Debbie Branson, office manager for Cortez Medical, which uses Humana’s PPO health plan for its employees. "It affects a lot of people and now we have to start shopping around for insurance."

Finding affordable plans will become increasingly difficult, though, if Humana drops out, said Jim Engel, a health-insurance broker in Cortez.

"There are alternatives, but the problem is becoming the lack of competition here, which causes rates to go up," he said. "That makes even more difficult for small businesses to provide employee health benefits that are affordable. Often the only alternative then is to give a slight raise and have them find their own, and that is not good."

Switching to an indemnity could cause premiums to rise between 40 and 60 percent, Engel said.

"Humana’s action reflects a larger crisis in Colorado’s small-group health-insurance market," said Tod Zacharias, vice-president of Humana’s small-group division. "We make this decision only after careful thought and detailed analysis, (but) current state regulations make it difficult to negotiate with hospitals and physician groups that we need to have in order to run a viable business.