The General Assembly's Insurance and Real Estate Committee vowed this legislative session to make healthcare more affordable.
Unfortunately, the committee's priority proposals will instead cost Connecticut in a number of ways.
As legislators vote bills out of committee to the House and Senate floors, the nonpartisan Office of Fiscal Analysis assesses the budgetary impact of the legislation.
While understanding what a bill will cost the state is important, the analysis does not always provide full transparency.
For instance, healthcare mandates significantly drive up the cost of health insurance.
Yet those costs are not reflected in fiscal notes because the mandate costs are not passed to the state.
Rather, insurance companies are forced to increase premiums to account for new coverage requirements. Those increases are passed directly to consumers.
OFA estimates startup costs for a public option of at least $2.25 million, including consultants' fees, administrative charges, and salaries and fringe benefits.
A public option also threatens hundreds of millions of dollars in tax revenue—not to mention undermines a key economic sector employing over 60,000 people in Connecticut.
The state applies a 1.5% tax on all net direct premiums underwritten in the private market. In fiscal 2018, that tax accounted for $209 million in revenue.
By shifting people to state-run healthcare plans, a public option erodes the number of premiums written in the private market, with a direct impact on tax revenue.
OFA also acknowledges a significant hole in its analysis. As the legislation does not specify the amount of state-financed subsidies needed to support a public option, its true costs remain hidden.
The fiscal note also includes warnings about the other costly consequences of a public option.
The analysis explains that the design structure, particularly surrounding state subsidies, could hurt taxpayers, who would be required to sustain the program if it becomes insolvent or in an effort to undercut premiums.
For instance, Connecticut's state-run health insurance plan for cities and towns lost over $10 million in 2018.
OFA notes the state loses its federal Employee Retirement Income Security Act exemption if it opens the state employee plan to the private sector. That brings new fiduciary, compliance, and reporting requirements and the threat of significant financial penalties.
A shift in the state's health insurance risk pools could also drive up costs if there is a disproportionate amount of unhealthy individuals enrolled in the program.
Health insurance mandates and government-run programs cost Connecticut taxpayers dearly—without realizing the promise of lower cost, higher quality healthcare.