Healthcare Bill Rekindles Cost Concerns

As Connecticut lawmakers push to wrap the legislative session, a sweeping healthcare bill that will increase premiums and administrative costs is drawing renewed concern.  

SB 342, as amended, touches nearly every corner of the healthcare system—from insurers and hospitals to utilization review, stop‑loss insurance, and claims processing. 

While the bill contains several consumer‑friendly elements such as such as notice requirements for hospital‑based infusion services and limits on step therapy, other sections create new financial, legal, and operational burdens for employers and insurers.  

“With healthcare affordability already a major challenge, this is a moment for structural reform, not added layers of regulation,” CBIA policy director Grace Brangwynne said.  

Three sections of the bill raise significant red flags.

Medical Necessity Cost Shift 

Among the top areas of concern is the rebuttal presumption of medical necessity.  

The bill creates a rebuttable presumption that any service ordered by a provider in the lowest cost‑sharing tier of a network is medically necessary—shifting the burden to carriers to prove otherwise.  

This weakens one of the few tools employers and insurers have to manage costs and steer care toward high‑value options.  

Carriers would also face higher administrative costs from documenting and justifying challenges.  

Eliminating prior authorization could increase utilization even when lower‑cost or clinically equivalent alternatives are available.  

Carriers would also face higher administrative costs from documenting and justifying challenges, expenses that typically flow back to employers through premiums.  

The provision distorts the logic of tiered networks by effectively turning the lowest‑cost tier into a guaranteed approval pathway.  

Similar language in SB 10 was estimated to add $504 million-$662 million annually in the self‑insured market and $656 million-$841 million in the fully-insured market. 

Stop‑Loss Regulation  

For the second time in two years, legislators are attempting to regulate stop-loss policies used in conjunction with self-insured plans.  

SB 342 directs the Health Care Cabinet to study and recommend ‘appropriate patient protections’ for stop‑loss insurance tied to self‑funded employer health plans.  

Federal ERISA law generally preempts state regulation of self‑funded plans. 

Self-funded employer plans are governed by federal ERISA law, which generally preempts state regulation of self‑funded plans. 

Even indirect regulation through stop‑loss policies could trigger legal challenges. 

In 2019 the Connecticut Department of Insurance released guidance explicitly stating stop-loss policies would not be approved if used in place of traditional health insurance.  

Automatic Downcoding Ban  

Section 5 of the bill prohibits insurers from using software to automatically downcode claims unless a documented clinical peer review is performed.  

Automatic downcoding is a standard industry practice used to prevent overpayment, detect miscoding, and process claims more efficiently.  

Requiring manual clinical review for each downcoding action slows claims processing, increases staffing needs, and raises administrative overhead.

Requiring manual clinical review for each downcoding action slows claims processing and raises administrative overhead.

It also heightens the risk of higher claims costs due to inappropriate coding slipping through without automated safeguards.  

Eliminating automatic downcoding will cost $113 million-$125 million annually in the fully-insured market and $202 million-$223 million in the self‑insured market—resulting in higher premiums and fewer resources for employers to invest elsewhere. 

SB 342 sits in the Judiciary Committee.  

---

For more information, contact CBIA’s Grace Brangwynne (860.244.1163).