Despite Bailout, Troubled State-Run Healthcare Plan Hikes Premiums

Connecticut’s financially troubled state-run healthcare plan for municipalities is hiking premiums 10.5%, despite a $40 million bailout last year.

The comptroller’s office, which administers the plan, shared the news with alarmed stakeholders last month.

A letter from Segal, the plan’s actuarial consultant, detailed the rate increase, which takes effect July 1.

“There has been an increase in claims, including increases in COVID-related experience and for elective procedures due to pent-up demand, especially during the recent months of the period,” the letter noted.

“This spike, with an expectation of a continued effect on claims during the renewal period, is causing a needed increase for the active medical and pharmacy claim rate.”

That announcement came just months after cities and towns were told to expect an 8% premium increase and has created havoc for those municipalities that adopted budgets based on that projection.

$40 Million Bailout

Impacted municipalities will now be forced to adopt supplemental budgets—with a potential for service cuts and tax hikes—or leave the plan, known as the State Partnership Plan 2.0.

The premium hike is also higher than the average increases the Department of Insurance approved for the fully-insured market last year: 5.6% in the individual market and 6.5% in the small group market.

The 10.5% premium hike follows a bailout of almost $40 million from the state’s federal COVID-19 pandemic relief funding allocation last December. 

“This reimbursement will reduce the required premium adjustment for next fiscal year, lowering healthcare costs for all Partnership members.”

Then-Comptroller Kevin Lembo, December 2021

In a Dec. 21 letter to plan administrators, then-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.”

“This reimbursement will reduce the required premium adjustment for next fiscal year, lowering healthcare costs for all Partnership members,” Lembo, who retired Dec. 31, added.

“The Partnership 2.0 fund balance now exceeds the reserve amount recommended by the state’s actuaries.”

However, despite Lembo’s claim that the bailout would lower costs, the comptroller’s office last week told plan participants that premiums would have increased 14.5% if not for the COVID funds.

Lack of Transparency

The continued financial concerns, combined with an ongoing lack of transparency, was central to the opposition mounted last year to legislation expanding the plan to cover small businesses and nonprofits.

Lembo ignored CBIA’s call last February for an independent audit “to address the significant questions surrounding the state-run municipal plan’s fiscal outlook and solvency status.”

Lembo ignored CBIA’s call last year for an independent audit of the troubled plan.

That call followed the earlier release of a report produced by the insurance agency Brown & Brown raising serious questions about the plan’s fiscal performance and outlook.

The Partnership Plan is not subject to the same regulatory oversight as private sector insurance plans.

For example, fully-insured plans must have rates and finances annually reviewed by CID, while self-funded plans are overseen by the federal Department of Labor.

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