The state is poised to open its employee health plan to municipalities and school districts, a controversial concept long advocated by labor unions, town officials and Democratic legislators.

A law passed last year required that the state offer coverage to non-state public employers beginning in January, but it was delayed after Office of Policy and Management Secretary Benjamin Barnes raised concerns about the proposed rules for the program late last year.

On Friday, Barnes notified state Comptroller Kevin Lembo that, in light of changes to the rules, his office would sign off on allowing non-state public employers to participate in the state employee plan.

“Like you, I am pleased that we will be able to provide municipalities and school districts with a viable alternative to managing their employee health care costs while, at the same time, protecting the financial interests of the State,” Barnes wrote.

Union backing

The State Employees Bargaining Agent Coalition must also sign off on the plan. Spokesman Larry Dorman said the coalition supports it, and said it will give municipalities a chance to participate in a new wellness program for state employees created as part of last year’s concessions deal. The program is aimed at encouraging workers to get preventive care and keep chronic conditions under control as a way to improve health and reduce long-term medical costs.

Opening the state employee health plan to outside groups has long been a goal of public employee unions and some legislators, including Speaker of the House Christopher G. Donovan, D-Meriden. A health care “pooling” bill that would have allowed municipalities, nonprofits and small businesses to participate in the state employee plan passed the legislature in 2009, but Gov. M. Jodi Rell vetoed it, citing concerns about the financial impact on the state and the need for more analysis.

Pooling was also a key piece of the proposed SustiNet state-run insurance plan that failed to become law last year. But a compromise on the proposal between legislative Democrats and Gov. Dannel P. Malloy’s administration produced the law requiring the state to offer coverage to municipalities, school districts and certain nonprofits.

Donovan, now a candidate for Congress, said cities and towns have already been in touch with the comptroller’s office and will save money by participating.

“I’m very excited about it,” he said. “The fact that this is up and running and people will have the opportunity to have quality health care at a lower cost is good. I think it’ll catch on.”

Donovan plans to introduce legislation this session that would allow small businesses to participate in the state plan as well, although its chances are unclear.

Eric George, a lobbyist on health care issues for the Connecticut Business and Industry Association, said the group has opposed pooling because it puts the state at risk of having to cover groups with high medical expenses. That could lead to higher costs to the state and higher taxes, he said.

“You don’t know which municipality is going to take the bite and accept invitation into the state employee plan,” he said. “If it’s a good risk, great. If it’s a bad risk, that’s a problem.”

George said there are fewer concerns if the plan is limited to cities and towns, but he said that extending the pooling to the state’s thousands of small businesses, as Donovan hopes to do, could be a significant problem.

Protections for the state

In December, Barnes also raised concerns about the potential for the plan to attract groups with higher costs. Although he said he supported the overall concept, Barnes said at the time that he would be unable to support moving forward unless there were more evaluation and significant changes to the plan’s rules.

Barnes said Friday that the revised rules for the program include limitations that allow for the board overseeing the plan to sign off on whether to let certain subgroups enter the plan. The state can also assign premium surcharges to subgroups believed to create additional risk, and has a mechanism to recoup claims losses in later periods if they exceed a quarter of 1 percent of the program. Barnes said that prohibits the plan from going too far out of balance before the state can begin recovering costs from participating communities.

“The modifications made to the rules of participation will help protect against, and greatly limit, the State’s exposure to any losses that may arise from non-state public employer participants in the plan,” he wrote to Lembo.

But Barnes also wrote that there would likely be challenges in building participation in the plan. Those include collective bargaining constraints, since joining the program, which has only one benefit design, would be subject to negotiations. Still, he said, the concept has strong support from organized labor and some town officials, and the comptroller’s office and state employee unions have reached out to eligible groups to promote participation.

“I’m hopeful that they’ll get some early participation which is strong and we’ll go forward,” he said.

Last year’s law calls for offering coverage to nonprofits beginning Jan. 1, 2013, but Barnes said that will require another set of agreements to address other legal issues, including how to preserve the state’s exemption from a federal employee benefit law for private employers.

Arielle Levin Becker covered health care for The Connecticut Mirror. She previously worked for The Hartford Courant, most recently as its health reporter, and has also covered small towns, courts and education in Connecticut and New Jersey. She was a finalist in 2009 for the prestigious Livingston Award for Young Journalists, a recipient of a Knight Science Journalism Fellowship and the third-place winner in 2013 for an in-depth piece on caregivers from the National Association of Health Journalists. She is a 2004 graduate of Yale University.

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