Insurance Committee Raises Bipartisan Small Business Healthcare Bill
A key legislative committee has scheduled a public hearing on bipartisan legislation that offers small business employees access to more affordable, high quality healthcare options.
The Insurance and Real Estate Committee will hear public comments on HB 5247 at its Feb. 27 meeting at the Legislative Office Building.
The bill allows small employers to band together through a Connecticut-domiciled trade association to offer self-funded health benefit plans (multiple employer welfare arrangements, or MEWAs) for employees.
By allowing associations to aggregate their employer-members and become “one employer,” small employers can access the same benefits large employers, unions, municipalities, and the state of Connecticut enjoy today.
A similar bill was championed by a coalition of bipartisan lawmakers led by Insurance Committee co-chair Rep. Kerry Wood (D-Rocky Hill) last year.
The committee approved the bill on a 9-3 bipartisan vote. However, it ultimately failed to be called for a vote in the House as the session came to a close in June.
Shrinking Options
The fully-insured health insurance market is decreasing in membership every year, total enrollment less than 80,000 lives today—down from over 230,000 lives only five years prior.
Carrier competition is also dwindling, with two major carriers withdrawing from the market in the last two years.
Lawmakers from both sides of the aisle view HB 5247 as a commonsense approach that will finally give small employers the scale and leverage to obtain high quality, cost-effective healthcare for employees.
The bill follows the success in Virginia in 2022 when the Democratic legislature and Republican governor came together to give associations the ability to aggregate their members under a self-funded MEWA.
Just last month, the Virginia Chamber of Commerce’s new WiseChoice Healthcare Alliance obtained a license from the state and will now offer coverage to enterprises with two to 50 employees, members of a participating local chamber of commerce, the Virginia Farm Bureau, and other trade associations.
The plan is expected to enroll over 100,000 members by next year.
The idea was made possible by bipartisan support for legislation pushed for years by Democratic state senator Monty Mason and Republican delegate Kathy Byron and enacted in 2022.
Lawmakers in Connecticut hope to emulate the success in Virginia by passing similar legislation this year.
Eligibility, Regulatory Oversight
Under HB 5247, associations eligible for licensure must be industry trade groups domiciled in the state with (1) a constitution and bylaws; (2) not less than 500 employees and not less than 25 employer-members, and (3) in existence for at least 5 years.
Employers eligible for enrollment under a health benefit consortium must be (1) domiciled in the state; and (2) an active member of the association, and employ at least two employees (i.e. sole proprietors and independent contractors are ineligible for group healthcare plans under federal law).
Similar to domiciled insurance companies today, these MEWAs will need to apply and obtain licensure from the Connecticut Insurance Department and comply with all requirements under 38a of the General Statutes.
To address concerns about solvency, the bill also requires the MEWA to secure an initial combined capital and surplus of $4 million and purchase and maintain a bond with CID.
Likewise with licensed insurance companies today, MEWAs will be subject to rigorous financial and market examinations by CID regulators.
For example, a MEWA will be subject to (1) financial examinations and any resulting investigatory hearings; (2) CID visitation and affair examination at least once every five years; (3) market conduct examinations; and (4) large group underwriting methodology reviews.
Consumer Protections
Unlike single-employer self-funded plans today that are subject to ERISA and thus exempt from state regulation, MEWAs will be required to cover all 10 federal essential health benefits and over 60 state coverage mandates.
In other words, the same level of required benefits in the fully-insured market will be required for self-funded MEWAs under this bill.
The same level of required benefits in the fully-insured market will be required for self-funded MEWAs.
In order to ensure the plans offered by these MEWAs are robust, the bill requires the trust to offer plans with an average actuarial value of at least (1) 60%; (2) 68%; and (3) 78% (equivalent to Bronze, Silver and Gold ACA plans in the fully-insured market today).
The bill also ensures that individual pre-existing condition discrimination and discriminatory rules based on the health status of an individual related to plan eligibility, or rate or contribution requirements is strictly prohibited.
The plans offered by the MEWA will also be required to be guaranteed issue and guaranteed renewable—if any employer wants to obtain a quote for coverage, the MEWA will be required to issue that quote and enroll the employer if they wish so.
Value-Based Insurance Design
Because these MEWAs will have increased purchasing power and larger scale, small employers will benefit from many of the things large employers and the state are deploying today.
Those include centers of excellence, wellness programs, health enhancement programs, alternative payment models, chronic disease navigation, patient-centered medical homes, and PBM pricing transparency.
The bill requires MEWAs to implement value-based insurance design and value-based contracting, and annually report the implementation of these programs.
The bill requires MEWAs to implement value-based insurance design and value-based contracting, and annually report the implementation of these programs to CID.
For example, the trust must annually report (1) a description of the VBID programs; (2) the number of employees enrolled in VBID; (3) the percentage of dollars spent on VBID; and (4) a description that explains how VBID lowers costs for participating members.
Stop-Loss, Underwriting
To insulate small employers from unpredictable and catastrophic claims, the trust is required to purchase and maintain stop-loss insurance for each health benefit plan, and purchase an aggregate stop-loss policy with a 125% attachment point.
Should the trust need to deviate from the 125% attachment point, it may apply to CID for a waiver.
The trust will also be subject to the same pricing and renewal methodology review that fully-insured large group policies are subject to today.
Similar to large employers, municipalities, and union trusts today, the MEWA will establish base rates formed on an actuarially sound, modified community rating methodology.
For example, similar to large employers, municipalities, and union trusts today, the MEWA will establish base rates formed on an actuarially sound, modified community rating methodology that considers the pooling of all participating employees’ claims.
It will then utilize each participating employer’s risk profile to determine rates by actuarially adjusting above or below established base rates, and utilize pooling or reinsurance of individual large claims to reduce the adverse impact on any specific participating employer’s rates.
The MEWA must establish the applicable pooling point, which will consistently apply to all participating employers.
Trust Requirements
To ensure the MEWA is owned and operated by its employer-member, the bill requires the MEWA to establish and maintain a board of trustees with at least five trustees.
The trust will be responsible for developing and implementing processes for trustee election, and discharge duties in accordance with generally accepted fiduciary standards.
The bill requires the trust to purchase and maintain directors’ and officer’s liability insurance, as well as fiduciary liability insurance.
The bill requires the trust to purchase and maintain both commercially reasonable directors’ and officer’s liability insurance, as well as fiduciary liability insurance.
The funds held by the trust must also be exclusively used to benefit the employers through (1) self-funding claims and reinsurance; and (2) defraying costs and expenses of operating the trust.
The trust will also be subject to ERISA and federal Department of Labor oversight and must annually file a Form M-1 with DOL.
For more information, contact CBIA’s Wyatt Bosworth (860.244.1155) | @WyattBosworthCT.
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