$40M COVID Relief Funds Bail Out State-Run Healthcare Plan

Connecticut has tapped $40 million in federal COVID-19 relief funds to stabilize the financially troubled state-run healthcare plan for municipal employees.

Questions about the fiscal solvency of the plan—administered by the state comptroller’s office and known as the Partnership 2.0 Plan—have persisted for a number of years.

In a Dec. 21 letter to plan administrators, Comptroller Kevin Lembo wrote that “$39,971,522 from the state’s Coronavirus Relief Fund has been moved into the Partnership 2.0 fund, significantly increasing its balance.”

“The Partnership 2.0 fund balance now exceeds the reserve amount recommended by the state’s actuaries,” Lembo, who is retiring Dec. 31, added.

“Those reserves add to the financial stability of the program and guard against claim fluctuations and any incurred, but not reported claims.”

‘Completely Unstable’

CBIA president and CEO Chris DiPentima said the state’s use of federal COVID-19 relief funds proves the plan—touted as a model for a proposed public option—is “completely unstable.”

“It’s a bottomless pit. It needs $40 million to stabilize itself,” he said.

“It’s a bottomless pit. It needs $40 million to stabilize itself.”

CBIA’s Chris DiPentima

“Taxpayers are the backstop of this plan since taxpayer dollars are subsidizing it when that money could be used for more critical needs like addressing the childcare, education, and mental health issues the pandemic has caused.

“This continues to verify what our members say, that the government is not capable of running something better than the private sector.”

Audit Calls Ignored

In February, CBIA called for Lembo to commission an independent audit of the plan following the release of a report raising new questions about its fiscal performance and outlook. No audit was commissioned.

Produced by the insurance agency Brown & Brown, the report warned that plan administrators needed to increase premiums by almost 20% in fiscal 2022.

The comptroller’s office had called for a preliminary premium increase of just 3%.

“Premiums appear to be artificially suppressed.”

CAHP’s Susan Halpin

The municipal plan also paid out significantly more in claims than it collected in premiums for both fiscal years 2018 and 2019, with corresponding medical loss ratios well above 100%.

“Committing $40 million in COVID relief funds to cover ongoing deficits in the Partnership Plan underscores what we’ve said all along,” Susan Halpin, the executive director of the Connecticut Association of Health Plans, told the Hartford Courant.

“Premiums appear to be artificially suppressed.”

Mounting Losses

In a Feb. 24 letter to DiPentima and CBIA assistant counsel Wyatt Bosworth challenging the latter’s testimony before a legislative committee, Lembo wrote that the plan’s financials were in “good standing.”

Lembo also noted that the plan’s projected MLR for fiscal 2022 was 96.6%, despite outside concerns he was not accounting for the full impact of the pandemic’s suppression of non-COVID medical care, with claims expected to increase significantly.

The state-run plan has already lost over $2 million in the first quarter of this fiscal year.

While the municipal plan finished fiscal 2021 with a 94.1% MLR, Bosworth called the expense trends of the last quarter of that year and the first quarter of the current year “troubling.”

“The plan lost $587,784 in the fourth quarter of last year and followed that with a $2 million-plus loss in the first quarter of fiscal 2022,” Bosworth said.

“We were told COVID would not negatively affect the municipal healthcare plan. The $40 million transfer of federal funds to the plan says otherwise.”

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For more information, contact CBIA’s Wyatt Bosworth (860.244.1155) | @WyattBosworthCT