The cost of health insurance is a top concern for businesses of all sizes, particularly following the 2010 implementation of the Affordable Care Act.
Private sector insurance companies, hospitals, drug manufacturers, and providers operate under complex laws and regulations set by federal and state governments.
The cost of complying with numerous mandates and burdensome administrative directives is a key factor behind rising insurance premiums, along with the cost of care itself.
Nonetheless, state and federal lawmakers are quick to criticize the private sector for those increasing costs.
Even more troubling? Their pursuit of policies that either drive costs higher and/or threaten to destabilize healthcare markets and the economy.
Lack of Oversight
There's growing speculation about Connecticut's ability to offer cheaper health plans—as proposed in a number of bills—without addressing underlying healthcare cost drivers.
The bills allow small businesses to purchase health insurance for employees through the state employee program. Both bills also create an insurance fund and advisory committee to explore state subsidized healthcare plans for individuals.
Under HB 7267 and SB 134, the state comptroller gains broad authority to manage public option plans with a striking lack of legislative and regulatory oversight.
For instance, the legislation allows the comptroller to adopt regulations to implement and manage what's being called the ConnectHealth Program.
That program includes a state-run healthcare plan for individuals supported by taxpayer subsidies.
Under the legislation, those subsidies will be available for individuals who do not currently qualify for ACA subsidies either through the federal or state healthcare exchanges.
The comptroller must submit plan designs, payment schedules, and reimbursement and subsidy rates to the legislature's Insurance and Real Estate Committee no later than March 1, 2020.
That 20-member committee—not the full General Assembly—then decides the fate of the plan.
Currently, private sector insurance companies are strictly governed by the Connecticut Insurance Department for rate review, regulatory compliance, and plan solvency.
Under the legislation, the department plays no oversight role with the proposed individual plan, nor with the second component of the proposed program, opening the state employee healthcare program to small businesses.
The legislation also grants the comptroller broad leeway to manage the small business public option plan, essentially operating as an Association Health Plan—a federal government initiative that Connecticut state regulators rejected last year.
AHPs allow small businesses to band together by geography or industry to obtain healthcare coverage as if they were a single large employer. Available in a number of states, the plans help small businesses reduce premium costs.
However, while state regulators prohibit the private sector from offering AHPs in Connecticut, the comptroller's plan is not subject to that oversight.
$10 Million in Losses
The Connecticut legislation also allows the comptroller to accept or reject small business plan applicants based on health factors, attempting to pull the best risks out of the private sector market.
There are additional concerns about state-run healthcare plans based on the performance of a plan the comptroller administers that allows approximately 44,780 town, city, and other public sector employees access to the state employee program.
The state charges municipalities over $10,000 per enrolled employee annually to participate in the plan, which last year lost more than $10 million.
State-run healthcare plans such as those proposed in Connecticut merely shift costs and do not address the underlying factors driving up insurance premiums.
There are meaningful steps state legislators can take to reduce the cost of healthcare. Consider:
- Cut mandates. Healthcare mandates drive up the cost of health insurance substantially by requiring carriers to expand coverage. Those costs are passed directly to plan participants. The business community recognizes a certain level of coverage is necessary to encourage broad market participation, but we must strike a balance to achieve quality and affordability.
- Eliminate the Insurance Premium Tax. This 1.5% tax is assessed annually on all premiums underwritten by private sector insurance companies. The tax is also passed directly to plan participants.
- Repeal or reform other state-run insurance programs. Connecticut's state-run health insurance exchange, Access Health CT, is funded through a 1.65% tax on all individual and small group premiums, with private sector insurance carriers subsidies totaling over $32 million annually. Eliminating that tax will lower premium costs.
History shows that public option plans do not work.
The public interest would be better served if lawmakers tackled the real cost drivers rather than pursue a path that expands government, increases taxes, and threatens one of the state's critical economic sectors.