Hidden Taxes Driving Up Healthcare Costs

A seemingly harmless provision in the Governor’s budget proposal could join several other hidden taxes, fees, and other factors that are driving up Connecticut’s health insurance costs to among the highest in the nation.

The legislature’s Public Health Committee held a hearing on SB 955—one of the Governor’s budget bills—that transfers $8.8 million from the Department of Public Health’s budget into the Insurance Fund administered by the Department of Insurance. 

This part of the Insurance Fund is paid for by health insurance carriers, compared with the Department of Public Health budget which is paid by the General Fund. SB 955 means that those insurance carriers will pass the extra cost along to health insurance consumers—individuals and families—in the form of higher premiums.

Last year, state lawmakers approved a similar transfer to pay for the State Innovation Model (SIM). The $3.2 million SIM transfer to the Insurance Fund is also being passed on to healthcare consumers in Connecticut through higher premiums.   

And even with the state now receiving $45 million in federal funding to pay for SIM’s operation, the hidden tax is still in effect and being paid for by health insurance consumers.   

Stack of hidden fees

Lawmakers need to see the two transfers as part of a growing stack of taxes and fees that are pushing health insurance premiums higher in Connecticut (see graphic):

• State Innovation Model (SIM): $3.2 million
• Immunization Fund: $32.7 million
• Access Health Fee (to fund the state’s healthcare exchange): $40 million
• Federal Health Insurance Tax: $8 billion
• Federal PCORI Fee: $2 per person
• Federal Reinsurance Fund: $63 per person

The Insurance Fund will total about $81.3 million 2017. That’s $81.3 million divided into everyone’s insurance premiums throughout the state. While the SIM and DPH programs are valuable initiatives, they should be General Fund expenditures—and not cause health insurance costs to rise.

More hidden costs

Other factors driving health insurance costs in Connecticut are the mandates the legislature approves. Mandates require health insurers to cover special treatments, medications and procedures, increasing the cost of health insurance.

This year, the Insurance Committee approved a number of new health benefit mandates. Lawmakers now considering these proposals should remember:    

• New insurance coverage mandates mostly impact Connecticut’s small employers and individuals because larger employers typically self-insure and therefore are regulated by federal law instead of state law
• New mandates also may have a fiscal impact on the state budget because for any new mandate the state will have to pay for the new benefit for individuals who receive subsidies through the state’s exchange.

While mandates may help a specific set of individuals, they also have a cost impact and should have to pass scrutiny of a cost-benefit analysis to determine their potential impact.

Connecticut already ranks among the highest in the nation with the most number of health benefit mandates—which contributes to the high cost of healthcare in the state.

While it’s certainly true that some health benefit mandates are needed, Connecticut exceeds the average even in our neighboring New England states.

Roundtable on Hospitals and Healthcare

Two bills approved by the Insurance Committee and a number of others before the Public Health Committee address items discussed by last summer’s Roundtable on Hospitals and Healthcare. 

The Insurance Committee proposals addressed provider billing (SB 808) as well as provider network structure (SB 807). The Public Health Committee also considered a number of proposals from the Roundtable.   

• SB 812: Focuses on efforts around adoption of electronic health records (EHR).  Widespread use of EHR will be a positive step for quality and cost issues in Connecticut.  At first the proposal included a fee on third party payers to pay for the initiative but that provision was removed from the version approved by the committee. Now, the body charged with implementing EHR will also have the power to bond significant amounts of money to pay for the operations.
• SB 813: Establishes new requirements about cost information for healthcare consumers
• SB 815: Establishes a Health Care Commission to analyze and monitor cost and transparency issues. It also includes a provision that allows the commission to charge healthcare providers and insurers in the state to pay for its operations.   

The group of bills looks to address a wide-range of healthcare policy issues and may have significant impact on overall healthcare policy in the state. 

 For more information, contact CBIA’s Jennifer Herz at 860.244.1921 | jennifer.herz@cbia.com | @CBIAjherz