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For Immediate Release
May 1, 2008
STATE EMPLOYEE HEALTH CARE PURCHASING PLAN COULD BE COSTLY FOR CONNECTICUT TAXPAYERS
Business community has 10 reasons to oppose the bill
The Connecticut business community is urging the state Senate to oppose HB 5536. The bill would open the state employee health plan to municipalities and small businesses in a way that would not save them money, and could be costly for Connecticut taxpayers.
“The issues of health care quality, cost and access are very important to everyone in Connecticut, but this bill does not address these key issues. Instead, it is the beginning of a state takeover of the health care system in Connecticut,” said John R. Rathgeber, Connecticut Business & Industry Association president and CEO.
“Legislators must take steps to reform our current health care system and make insurance more affordable by concentrating on reducing the cost drivers, improving the quality of care and providing the uninsured access to health care,” added Rathgeber.
Among the problems with the bill are the proposal's inherently high cost and illusory savings potential; absence of consumer safeguards; potential for rate increases within a three-year “lock-in” period; and its true intent of merely paving the way for a taxpayer-funded, state-run health care system.
1) Promised savings are suspect
Large health insurance purchasing pools do not significantly reduce the cost of health care, which is the biggest barrier to insurance, because they do not reduce the cost of medical care — approximately 85 percent of premium costs. State employee benefits plans are more expensive than the average citizen's plan, so adding more people to it won't save any money. A large pool doesn't solve the problem because it doesn't address the real issue — controlling costs.
2) Additional costs
The state employee health plan is known for its high costs and benefit levels. While some municipalities believe they will save money under this plan, they could in fact see their health insurance costs — and their property taxes — rise as a result. A comparison of some state health plans with comparable municipal health plans shows that HB 5536 will actually cost municipalities more money.
City/town |
Proposed savings |
Additional cost for each employee annually* |
Danbury |
$2.8 million |
$2,782 more per employee each year |
East Hartford |
$1.1 million |
$5,771 more per employee each year |
New Haven |
$8.7 million |
$5,333 more per employee each year |
Tolland |
$50,000 |
$6,022 more per employee each year |
*These annual rate increases are for the highest benefit level plan offered by the municipalities compared with the highest benefit level plan offered by the state (employee +1 selection).
3) No safeguards
This proposal would operate outside the safeguards of the state insurance laws, including the state's small-group rating laws. These protections have helped businesses with less healthy or older employees maintain health insurance by spreading the pooled risk across the broadest possible base so that no single small employer experiences a dramatic increase in premium rates. Companies with employees who suffer from chronic conditions or who are generally older could have trouble obtaining and maintaining insurance under this new system.
4) Businesses are locked into multiyear contracts with no guaranteed rates
Businesses or municipalities that decide to participate in the program will have to commit to purchase the plan for at least three years without guaranteed rates. Participating companies will be unable to shop around for the best rates, as they do now, and will be vulnerable to rate hikes within their three-year commitment, which would be costly.
5 ) Increases in state budget costs
If this plan is adopted, two of the state's three insurance carriers have already said they would have to reopen the contract and rerate the costs for health care coverage. A third company said it would have to do so within a year. This could significantly increase state costs and affect the state budget.
6) First step to single-payer, government-run health care
Leading advocates of a single-payer, government-run health care system have said that a statewide purchasing pool system would be the first, interim step toward a full-scale government takeover of health care. Such a government-run system would be very costly, unsustainable and harmful to the state's economy. It could promote the rationing of health care and would devastate Connecticut 's health insurance industry, placing tens of thousands of jobs at risk and striking a damaging blow to the state's economy.
7) Unlevel playing field
A competitive marketplace is the cornerstone of our economy, and increased competition helps create better products and services that meet people's needs. This bill would put the private sector at an unfair disadvantage with the state, because the state is not subject to the 1.5% insurance premium tax private-sector companies must pay. If proponents believe this is a good idea, then the insurance premium tax should be eliminated for all small business customers.
8) Government isn't adequately funding its present health care programs
The state already fails to meet its obligations in core areas with a nearly $22 billion unfunded liability for state employee retiree health care benefits. And it fails to make adequate payments for Medicaid and Husky programs, creating a $300 million cost shift picked up by the private sector. Everyone knows that state health care benefits are more generous than those in the private sector. The state's premium employee health plan is very expensive, at more than $22,000 a year for a family of four, paid for primarily by taxpayers. Adding more people to this costly plan isn't expected to save any money.
9) Legislature has already created a high-level committee to reform health care
Last summer, the legislature created the HealthFirst Connecticut Authority to explore long-term health care reform in the state. The authority consists of high-level executives from numerous organizations across the state, working together to find ways to provide quality and affordable health care. The state should not adopt HB 5536 or any additional health care proposals until the authority has made its recommendations to the governor. The recommendations, we hope, will focus on solutions that fit the needs of Connecticut businesses and residents alike.
10) Not what the Connecticut public wants
Moving toward a government-run health care system is not in line with public opinion. According to a Zogby International survey, nearly three-quarters of state residents said that the best health care reform would be to control rising health care costs to make private insurance more affordable, rather than moving toward a government-run health care system.
Legislators should listen to Connecticut residents and businesses alike who believe the health care system should remain in the private sector.
The majority (83 percent) of Connecticut residents responding to the Zogby survey said they are satisfied with their health insurance, and they don't believe a taxpayer-funded state government-run health care system would make it better. Sixty-five percent of the respondents said they oppose raising state taxes to pay for a new, multibillion-dollar, state-government-run health care system. Nearly three-quarters (74 percent) said the best way to reform the current system is to control health care costs and make private insurance more affordable.
"Most Connecticut adults are pleased with their health care and think it should remain a private-sector industry,” pollster John Zogby said. “This fits with other Zogby polling nationwide that shows people sense changes need to be made to the health care industry, but that they do not trust government to take it over."
“We must build on the strengths of our current employer-sponsored health care system. Focusing on health care cost-drivers rather than a new state-run system is the better way to make health care more affordable and accessible,” said Rathgeber.
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CBIA is the state's largest business organization, with 10,000 members.
For more information contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com.
350 Church Street · Hartford, CT 06103-1126 ·
Phone: (860) 244-1900 · Fax: (860) 278-8562
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