Taxpayer Risk, Transparency Issues Derail State-Run Healthcare Plan

Issues & Policies

For the third year in a row, a controversial proposal to implement a state-run healthcare insurance option for small businesses and nonprofits failed to move forward.

SB 842 opened the municipal plan administered by state Comptroller Kevin Lembo’s office to small businesses, nonprofits, and unions.

Economic Impact of Connecticut's Health Insurers

However, questions about the State Partnership Plan 2.0’s fiscal solvency, as well as concerns from the governor’s office and moderate Democrats regarding taxpayers propping up the expansion, ultimately led to the Senate failing to act on the bill before the session’s June 9 deadline.

CBIA president and CEO Chris DiPentima told lawmakers at a public hearing in February that previous multi-million dollar deficits incurred by the municipal plan, the uneven playing field with the private market, and the inevitable future subsidization by taxpayers gave small businesses great concern. 

DiPentima noted that 98% of CBIA members reported somewhat or very concerned about the rising costs of insurance, but over 69% of them opposed the public option, with 57% expressing concerns that taxpayers would subsidize plan deficits and almost 50% reporting they did not trust the state to manage health insurance plans.

Audit Call

CBIA called for the comptroller to commission an independent audit of the state-run municipal plan following the February release of a report produced by the insurance agency Brown & Brown that raised serious questions about the plan’s fiscal performance and outlook.

At an Insurance and Real Estate Committee in March, committee co-chair Rep. Kerry Wood (D-Rocky Hill) offered an amendment requiring the plan to be fully insured and subject to annual, independent audits.

CBIA supported the amendment, which addressed some of the concerns shared by Gov. Ned Lamont and the House Moderate Democratic Caucus, and it was ultimately adopted with bipartisan support.

In mid-April, the chief executives of five of Connecticut’s largest insurance companies sent a letter to Lamont expressing serious concerns with the proposal. The CEOs warned “[t]he argument put forth attempts to argue the partnership program is solvent and successful; we would argue that taking one pot of money to cover a deficit in another is not sound fiscal policy.”

Those concerns also echoed by some of the state’s largest labor unions. The Uniformed Professional Fire Fighter’s Association, which represents 4,000 career firefighters across the state, sent a letter to legislative leaders expressing opposition to the public option. That followed a similar letter from the Connecticut Teamsters Local Unions in March.

In late May, the governor said he could not sign the bill if it passed the Senate and House. His spokesman, Max Reiss, told the Hartford Courant that Lamont did not support the program “given the potential blank check to the state of Connecticut to cover [the] public option.”

Small Businesses Dodge $50 Million HIT

With the public option scrapped, focus shifted to the remaining provisions of SB 842 and the governor’s health insurance legislative proposal, HB 6447.

Both the governor and Senate Democrats proposed a $50 million annual assessment on all commercial insurance carriers to fund expanded subsidies on state exchange plans, implement reinsurance programs, covered to undocumented residents, and expand Medicaid Part A.

CBIA assistant counsel Wyatt Bosworth told lawmakers at a March public hearing in March that the business community strongly opposed the assessment “due to the financial burden that will be placed on the large group and individual markets ….”

He noted that recent passage of the American Rescue Plan Act made such assessments duplicative, as Congress allocated more than $42 billion to the states to fix the subsidy loophole that currently exists under the Affordable Care Act.

The proposed assessment was similar to the ACA’s costly Health Insurance Tax. Congress repealed the tax in 2019, with the repeal taking effect earlier this year. HIT drove up healthcare costs for millions of American families and small businesses and was repealed with overwhelming bipartisan support. 

According to an Oliver Wyman report, the HIT repeal resulted in major cost savings for insured Connecticut residents. For example, in 2021, those in Connecticut with individual marketplace coverage will see a total premium reduction of over $23 million, while small group enrollees will see a $25.4 million reduction and large group enrollees will see total savings of $54 million.

Insurance Committee ranking member Sen. Tony Hwang (R-Fairfield) and Senate Republicans proposed a viable alternative healthcare bill which included a reinsurance program, benchmarking, and Canadian drug importation. That bill did not advance.

Reform Bill

The proposed assessment was ultimately scrapped in the state budget negotiations. In lieu of using revenue from the assessment to fund Medicaid and exchange expansion, the new proposal uses existing state appropriations to fund such programs.

Instead of a HIT assessment, a new healthcare reform bill, HB 6687, was filed via emergency certification in the last days of session. The bill passed both chambers and awaits the governor’s signature.

The bill does three things, all funded entirely through the state’s general fund: (1) expands Medicaid to undocumented children who are eight years old or younger with an income below 201% of the FPL; (2) expands post-partum Medicaid coverage for women with an income below 263% of the FPL; and (3) expands Husky B to undocumented children 8 years old with an income between 201% and 333% of the FPL.

The bipartisan budget that passed both chambers and is expected to be signed Lamont also allocates $8 million next fiscal year and $15.6 million the following year for exchange subsidies and cost sharing reductions under a newly-created Covered Connecticut Program.

Benefit Mandates

According to a report produced by the Office of Legislative Research last October, the state has sixty-nine health benefit mandates that apply to fully insured commercial health insurance policies. 

These mandates drive up costs for small businesses because with each new requirement, insurers must expand coverage to include the additional services or devices.

Each year, Connecticut residents pay an additional $2,085 in premium costs because of the state’s 68 health benefit mandates.

This increases the cost of health insurance premiums and those increases are passed directly to enrollees.

Each year, Connecticut residents pay an additional $2,085 in premium costs because of the 68 health benefit mandates codified in our state’s statutes.

There were a number of benefit mandate bills raised this year, although none passed both the House and Senate.

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


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