HARTFORD, CT — The Office of Fiscal Analysis says it will only cost Connecticut $1.5 million to open up the state employee health plan to small businesses in the first year, but analysts are concerned about what happens if claims outpace premiums.
The state plan is self-insured, which means the state is responsible for paying out the claims.
The fiscal note says “as a self-insured pool, the state currently bears the risk for costs incurred in excess of plan premiums. The state does not currently have stop-loss insurance. To the extent claims are in excess of the premiums established, there will be a cost to the state.”
Sen. Kevin Kelly, R-Stratford, the ranking Republican on the Insurance and Real Estate Committee, said that’s exactly what he’s worried about, too.
“We don’t know how many people are going to participate and what happens when costs exceed premium,” Kelly said.
He said the cost of the state comptroller’s office handling the actuarial analysis and adding staff for plan design is not the cost he’s concerned about. He said he’s concerned about whether the taxpayer will be on the hook to cover the costs if the state comptroller’s office is unable to accurately predict the risk.
“I hope it does make Appropriations stop and look,” Kelly said Friday. “This confirmed everything I was saying that this is a real risk and we need some security given that taxpayer dollars on are the line.”
Currently, the Connecticut Partnership Plan — which is the pool that would be expanded to include small businesses — has claims that are running 5 percent higher than the amount of premium it’s collected from its members. Members currently include employees of municipalities and school boards.
State Comptroller Kevin Lembo said the reason claims are outpacing premiums is because a large number of Fairfield County towns joined the Connecticut Partnership Plan this year, so the cost of care went up — healthcare is more expensive in Fairfield County.
Premiums will increase next year to make up the difference, according to Lembo’s office. The amount of the increase won’t be available until mid-April.
Lembo said that the public option legislation will help resolve this challenge because it would allow them to broaden the design of the health plans and increase premiums slightly in more expensive parts of the state.
According to the fiscal note, the small employers who are approved to join the ConnectHealth Plan, “may be adjusted for geographic cost-of-living and network differences,” including “demographics of the employer’s employees.”
“The state has to decide once and for all whether it wants to lead by talking points or action,” Lembo said. “We need to stop second guessing ourselves when one year is out of line.”
Lembo said the fact that the Connecticut Partnership Plan has claims outpacing premiums this year should not be a concern going forward. He also doesn’t believe the small group market in Connecticut is that different from those who are currently participating in the plan.
Lembo said with the help of greater design capacity and the ability to increase premium slightly in more expensive parts of the state — “my hope is that the legislature passes this legislation.”
On the other hand, there could also be years where the state collects more in premiums than it pays out in claims. In that case, “reserves will mitigate future premium increases necessary to cover plan losses,” according to the fiscal note.
The Office of Fiscal Analysis note also worries about other revenue loss to the state if it chooses to approve this public option.
It says insurance carriers are required to pay a 1.5 percent premium tax to the state. Since the new ConnectHealth Plan is not technically insurance it won’t be subject to that tax.
“To the extent individuals and small employers shift into plans operated by OSC [Office of the State Comptroller] not subject to the tax, the state will experience a General Fund revenue loss. The state collected $209 million from the Insurance Premiums Tax in FY 18,” according to the fiscal note.
Lembo said one of the biggest costs for small businesses with fewer than 50 employees is their health insurance.
“If the state wants to grow small business and broaden economic development opportunities, then this is the way to do it,” Lembo said.
There are two identical versions of this bill, one in the House and one in the Senate. The bills were both approved along party lines in committee.