Connecticut health insurance premiums were the sixth-highest among states for both individual and family coverage in 2019. Making healthcare more affordable was the drumbeat from voters last year. But Connecticut policymakers have responded with weak options that kick the can down the road.
Controlling the drivers of health costs is advanced placement politics. Powerful industries in Connecticut profit from the status quo. The pandemic made it harder to hold hospitals and vaccine makers accountable. But the longer we wait to face facts, the worse the problem gets.
The options policymakers offered this year could make small, short-term differences, but won’t move the needle much. Covered Connecticut, which passed, subsidizes Access Health CT insurance coverage for low-income members using tax dollars. It will help some people, but when federal subsidies end and the state budget returns to a deficit, its future will be uncertain. Taxing some premiums to lower the cost of other premiums, through a public option that is built on a very expensive foundation, didn’t pass. The reinsurance proposal would have shifted some premium costs onto taxpayers but would have removed incentives to lower costs. Billed as a way to control costs, the administration’s ongoing Cost Cap plan to track healthcare spending is only telling us what we already knew and it hasn’t worked in Massachusetts. We need to get serious.
I’ve said it before, but to make a meaningful, lasting difference in health insurance costs, we must control input prices. We can’t tweak incentives or shift costs around anymore. The main drivers of rising premiums are skyrocketing drug prices and the ongoing consolidation of large health systems, usually headed by hospitals, that stifles competition for healthcare services.
According to the Health Care Cost Institute, between 2014 and 2018, healthcare spending per Connecticut resident rose 18% , mainly because of rising prices. Only one seventh of the increase was because we are using more healthcare. The increases are largely in prescription drugs and hospital services. By 2018, Connecticut residents spent 22% more than the average American on prescription drugs.
In the absence of federal action, states are tackling prescription drug prices. Governor Lamont proposed a tax on excessive prescription drug price increases this year; unfortunately, it didn’t pass. It’s a great place to start. Other states have created affordability review boards and are requiring supplemental rebates for drug prices that exceed their value, among other options.
Consolidation of healthcare markets is the other major driver of healthcare costs. Hospitals merging and buying practices started years ago but it has accelerated with the pandemic. As health systems grow larger, there is less competition in the market, and those large systems can demand higher prices without any improvement in quality. Connecticut’s hospital markets are among the most consolidated in the US and a recent study found that between 2016 and 2018 more Connecticut physicians affiliated with large health systems in every area of the state. While Connecticut has an approval process for large consolidations, in the last four years 96% of application decisions were approvals.
Other states are taking steps to reduce consolidation and support competition. Options include prohibiting contract clauses that exclude other providers from insurer panels, put health systems in the least restrictive tier for consumer copays regardless of quality or cost, gag and noncompete clauses, and limits on out-of-network referrals that restrict providers from providing the best care for patients.
The state should strengthen standards for mergers and acquisitions. The state should also enforce conditions on approvals and monitor for potential harms. The state must be able and willing to take corrective action, including unraveling the merger, if necessary. The state can place a moratorium on mergers and acquisitions until policies that support competition are in place.
State and commercial payment reforms placing the financial risk on providers have encouraged the growth of large health systems. Despite significant investments promoting the model, there is little evidence that large health systems either save money or improve the quality of care. Despite this failure, payers continue to promote the model. To encourage improvements in quality and savings, and to protect competitive markets, the state should regulate large health systems as Massachusetts and other states do.
The good news is that there are plenty of policy options for states to tackle the drivers of rising health insurance costs. The bad news is that they are all politically hard. We should start slow to avoid unintended consequences, adjusting as needed, but we have to start now.
Ellen Andrews, PhD, is the executive director of the CT Health Policy Project. Follow her on Twitter @CTHealthNotes.
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