What impact does Connecticut's health insurance industry have on the state's economy?
Let's start with the 25,000 people who work in the industry—not to mention the 23,000-plus additional jobs the sector supports in ancillary industries.
A new report from the Connecticut Economic Research Center shows the sector pays $5.2 billion in wages and benefits annually, with an average salary of $123,000.
The industry also generates $15.5 billion economic activity annually, pays over $209 million in state taxes, and provides $101 million in funding for public health and welfare programs.
While Hartford remains true to its name as the Insurance Capital of the World, carriers have operations throughout the state, including in Bloomfield, Windsor, Middletown, Windsor Locks, Norwalk, Wallingford, Rocky Hill, Glastonbury, Farmington, and Milford.
As the health insurance sector is one of the key job contributors to the state, it comes as no surprise that it also contributes heavily to Connecticut’s revenue stream.
Of the $15.5 billion the industry generated last year, $9.9 billion came from added value, or wealth created in the state, due to industry activities.
About $5.2 billion came from industry salaries and benefits—nearly twice the state average at $123,000.
"Spending from the labor income received by employees working in the health insurance industry and employees of the indirectly-affected establishments cascades through the state's economy from household spending on goods and services," the report notes.
The health insurance carriers also pay significant state and local taxes, most notably the state premium tax, a 1.5% levy on net direct premiums.
The Department of Revenue Services collected $209 million in premium taxes in fiscal 2018, with a portion of that revenue helping fund the state Department of Insurance and the state's healthcare exchange, Access Health CT.
"In 2018, total withholding taxes collected by the health insurers were over $42 million while unemployment taxes collected were over $2 million," the CERC report notes.
"In addition, Connecticut residents working in the health insurance industry pay personal income taxes to the state and property taxes (e.g., residence, automobile) to local governments."
Additionally, the carriers contributed over $100 million to public health and welfare programs, such as the Children's Health Initiatives, AIDS Services, Office of Healthcare Advocate, Breast and Cervical Cancer Detection and Treatment, as well as the Office of Health Strategy.
Despite the sector's major economic impact, it is far from immune to economic distress and political uncertainty.
While the CERC report emphasizes the health insurance industry's economic value, it also notes that technological advancements and political volatility pose constant threats.
As the 2020 elections draw near, healthcare once again takes center stage of the political conversation at the federal and state levels.
The industry's instability began nearly a decade ago with the implementation of the Affordable Care Act, although that's certainly not the only challenge it faces.
As the fate of the ACA hangs in the federal court system, public option and single-payer proposals continue to gain political traction and threaten this important economic sector.
"This continued instability, and the patchwork health insurance regulations occurring at the state level across the country, are likely to increase administrative costs within the health insurance industry and also make investments and other planning for the future of the industry difficult," the report said.
Connecticut lawmakers proposed a number of bills this year—including seven public option-related measures—with the potential to dramatically dilute the industry's job and economic impact.
While those proposals ultimately failed, advocates have promised to return for the 2020 General Assembly session.
The CERC report estimates that even a 10% decline in the state's health insurance industry would lead to a loss of some 5,000 jobs and $1.6 billion in economic output.
A decline of 25% to 50% would lead to a loss of 12,000 to 24,000 jobs and $4 billion to $8 billion in economic output.
"The health insurance industry remains in a state of change due to national and state-level policy and technology changes," the report says.
"These changes may lead to lower employment in the health insurance industry and in the state's economy as a whole; if this occurs there could also be a decrease in economic output and other economic indicators."