Diving into the truth behind the health-care purchasing pool proposal

(April 28, 2008) A state government health-insurance purchasing pool for municipalities, small businesses and other groups in Connecticut is the much-talked-about goal of HB-5536, which the House approved last week.
Unfortunately, much of the talk about the proposal is inaccurate, including what some municipalities are expected to “save” under this system.

Despite what some say, those obtaining health insurance through the proposed pool would find themselves outside of the protections of Connecticut’s health insurance laws. (HB-5536 says that title 38a — which contains Connecticut’s health insurance laws — does not apply to this system.)

This is a big problem, since these laws were specifically designed to protect the very groups the new system will be marketed to — especially small companies with employees who are older and/or who may have greater health concerns.

Connecticut’s health insurance laws governing the rates for small businesses (with 50 or fewer employees) spread the insurance risk across the broadest possible base to make sure that no small business experiences a dramatic increase in premium rates.

But once a business, municipality or nonprofit group decides to participate in the pool, it would be “locked in” for three years and blocked from seeking more affordable health insurance on an annual basis.

Still worse, and despite what advocates say, the proposed system won’t reduce health insurance costs for cities and towns — unless they decide to reduce the level of benefits they are currently providing their employees by opting into one of the state’s lower-benefit plans.

A misleading cost example offered by proponents of HB-5536 is the city of Danbury. Some claim that if Danbury were to scrap its current health insurance policies and purchase the state employee plan instead, it could save millions of dollars.

But that’s not the case, because the analysis that found the alleged savings for the city didn’t compare city and state health plans with comparable benefit levels and designs — therefore, it was not an accurate, “apples-to-apples” comparison.

On the other hand, the state Office of Policy and Management (OPM) found that if Danbury were to jump into the new state pool with a similar benefit plan, its health care costs could increase — by more than $4 million a year. This would have significant property tax implications.

According to OPM, other municipalities and groups joining the state purchasing pool would find similar cost-increase “surprises.”

Focusing on the real “apples-to-apples” — rather than “apples-to-oranges” data and implications of HB-5536 should provide an understanding of why this proposal would be harmful to groups that participate in the program.

For more information, contact CBIA’s Eric George at 860-244-1921 or eric.george@cbia.com.