Report: Healthcare Cost Strategies ‘Not Working’

Connecticut healthcare spending increased 7.8% in fiscal 2023, exceeding the cost growth benchmark for a third consecutive year.

The annual targeted growth rate for 2023 was 2.9%, according to the Office of Health Strategy’s annual Cost Growth Benchmark Initiative Report, released March 31.

The report warns that current cost containment strategies “do not appear to be working, or working sufficiently, to bring down the growth in spending.”

The benchmark program was created in 2022 with the goal of slowing healthcare costs and increasing affordability for residents.

The cost growth benchmark is set by blending projections of state economic growth and Connecticut household income.

Spending growth is tracked among three markets: commercial (including fully-insured and self-funded plans), Medicaid, and Medicare. 

‘Continuing Challenges’

Total per capita medical expenses grew 13.7% in the Medicare market, 6.2% in the commercial market, and 2.2% in the Medicaid market.

Aggregate spending jumped to $38 billion, with Medicare responsible for 35% of all spending, followed by the commercial market (32%) and Medicaid (25%).

Key growth drivers included non-claims spending (114%), retail pharmacy (9%), and hospital outpatient services (7%).

“Connecticut healthcare cost growth has continued to outpace this measure of affordability.”

OHS Cost Growth Benchmark Report

Long-term care was the only category to see a decline, falling 0.3%.

The OHS report notes that the growth rate is “signaling continuing challenges in containing spending growth at a rate that is affordable to residents and businesses.”

“Broadly, the benchmark value represents affordable and sustainable growth in the healthcare sector,” the report states.

“Despite having a benchmark established by statute, Connecticut healthcare cost growth has continued to outpace this measure of affordability.”

Employee Burden

Over 40% of state residents in the state are enrolled in commercial health insurance, typically through an employer-sponsored health plan.

More than 85% of commercially-insured enrollees are covered by fully or self-insured large group plans, with about 5% of commercially-insured enrollees covered under fully or self-insured small group plans.

From 2002 to 2023, employee contributions grew from 22% to 30% of total premium.

From 2022 to 2023, total medical expenses in the commercial space increased to to $8,625 per member per year. 

As a result, employees are burdened with rising premium costs.

From 2002 to 2023, employee contributions grew from 22% to 30% of total premium. On average, employees contributed $7,653 of total premium, about 8% of the median household income. 

State Mandates

OHS will hold a June 23 informational public hearing with stakeholders and organizations identified as potential cost drivers from 9:30 am to 3:30 pm at the Legislative Office Building in Hartford.

By October this, OHS will submit additional policy recommendations toot he legislature to address the healthcare cost challenges faced by residents, governments, and employers.

Legislators are also considering HB 6895, which requires the Insurance and Real Estate Committee to review the quality and cost impact of mandated health benefits before they are passed into law.

State-mandated benefits add more than $2,000 annually to the cost of health insurance premiums.

Connecticut is in the top three states for state-mandated healthcare benefits, which drive up the cost of insurance for employers because with each new requirement, insurers must expand coverage.

State-mandated benefits add more than $2,000 annually to the cost of health insurance premiums in Connecticut.

HB 6895 is waiting for a vote in the House. 

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