Tapping into frustrations over the rising cost of health coverage and a lack of access to care, Democratic lawmakers in Connecticut are planning a package of reforms aimed at reducing expenses for people who buy their health insurance through the state’s exchange and making coverage more affordable for small businesses.
At the center of the proposal is a plan to revive the Health Insurance Providers Fee, more commonly known as the Health Insurance Tax – a tax on carriers created under the Affordable Care Act to help fund federal and state marketplace exchanges. Congress repealed the federal tax on insurers in 2019; the rollback is effective this month.
But state legislators want to reinstitute the providers fee in Connecticut, a move they say would bring in tens of millions of dollars to create additional subsidies for people who purchase coverage through the state’s exchange, Access Health CT, and to support other priorities, which could include an expansion of Medicaid, known as HUSKY in Connecticut, or extending coverage to undocumented residents.
“It attacks the root problem we face on the individual market right now: the exchange is too expensive,” said Rep. Sean Scanlon, a Guilford Democrat who is a co-chair of the legislature’s Finance, Revenue and Bonding Committee and a proponent of the health reform package. “If you don’t qualify for a subsidy, the exchange is just not that great for you.”
Insurance companies are opposed to the tax and say its return will mean increased premiums for people on fully insured plans. With the federal repeal, costs are expected to go down this year, said Susan Halpin, executive director of the Connecticut Association of Health Plans, which lobbies on behalf of insurers. But the relief won’t last if the providers fee is resurrected.
“A lot of people are explaining it as a wash; it would not be a wash here in Connecticut,” Halpin said. The break that consumers are getting in 2021 would not continue in future years if the fee is imposed at the state level, she said.
Lawmakers say the tax could bring in anywhere from $30 million to $100 million in annual revenue. The fee is based on insurance premiums, and the tax is proportional to the carriers’ market share. Estimates are still being run on precisely how much funding it would generate in Connecticut.
But legislators, who acknowledge that the COVID-19 pandemic has laid bare longstanding disparities in access to care, already are devising plans for the funding.
“My goal for this bill is to make sure that no matter who you are, if you’re having problems purchasing health insurance, this is helping with that,” said Sen. Matthew Lesser, a Democrat from Middletown who is co-chair of the Insurance and Real Estate Committee. “If we’ve learned anything from the pandemic, it’s that we’re all endangered if people in our communities don’t have access to health insurance.”
Additional subsidies
A top priority for the funding would be to create additional support for people buying insurance through Access Health CT. About 70% of the 100,000 people who buy their coverage through the exchange in Connecticut receive subsidies, such as an advanced premium tax credit, to help pay for their plans.
But there are many others, lawmakers say, who don’t qualify for subsidies and can’t afford the monthly premiums.
The reforms proposed are “directly aimed at the working class, middle class person who’s not poor enough to qualify for HUSKY and not poor enough to get a subsidy, but they’re not well off enough that they can afford the premiums on Access Health,” Scanlon said. “If we can give more of those people subsidies, more people will sign up for Access Health. And if more people sign up, Access Health would be stronger and more carriers may want to join.”
Two carriers now sell individual plans through the exchange – Anthem Health Plans and ConnectiCare Benefits Inc.
James Michel, CEO of Access Health, said he would wait to see more specifics of the bill before weighing in. But leaders at the exchange support “anything that’s going to help Connecticut residents get access to affordable, quality health insurance,” he said.
“It’s still too expensive for some residents,” Michel said. “So we are ready to work with the carriers and the elected officials to come up with the best possible solution.”
In addition to the subsidies, Lesser wants to use a portion of the revenue to push the state’s qualifying threshold for HUSKY A – Medicaid coverage that is available to adults with children, pregnant women and others – to 201% of the federal poverty level. It currently is 160%. That would allow thousands more people to obtain coverage through the state’s Medicaid program.
Lesser is also exploring ways to use revenue from the Health Insurance Tax to extend coverage to Connecticut’s undocumented community.
In 2019, some legislators tried unsuccessfully to open the state’s Medicaid and Children’s Health Insurance Program (CHIP) to undocumented children in Connecticut. Their plan hit a roadblock when officials with the nonpartisan Office of Fiscal Analysis estimated it would cost $53 million per year for the first two years of the program. Legislators and nonprofit organizations said there were about 18,000 undocumented youths in the state at the time, though not all of them would enroll in the programs right away.
The bill cleared the legislature’s Human Services Committee but did not come up for a vote in the House or Senate.
Despite that, Lesser said, the General Assembly must pass some reform this year addressing health care for the undocumented community.
“We should recognize that Connecticut’s all in this together,” he said. “And if we can solve this issue of health care affordability, it’ll be a game changer for Connecticut’s economy.”
Insurance industry officials have argued that the tax, coupled with a plan to create a so-called public option in Connecticut, would do the opposite.
“You’re going to have a death spiral in the market. What does that do to your flagship industry?” Halpin said. “If Connecticut goes in this direction, likely so will other states, and there goes our economy.”
Public option and reinsurance
The health reform bill is expected to include two other familiar proposals: a “public option” plan that would use the state’s purchasing power to negotiate insurance policies for small businesses and nonprofits, and the creation of a reinsurance program.
Comptroller Kevin Lembo and Democratic Leaders from both chambers announced in November their intention to bring back the public option bill, which failed in 2019 and was shelved in 2020 amid the pandemic. The latest proposal involves setting insurance rates each year based on claims to keep costs lower and coverage broader than other plans. Businesses with 50 or fewer employees and nonprofit groups would benefit from this coverage.
Lawmakers did not rule out creating an individual plan, but they said the measure would likely focus on small businesses and nonprofits.
During the fall announcement, Lembo ruffled some feathers when he suggested the state – and its taxpayers – would be the backstop for the program. Legislators and state officials said recently that they would instead support purchasing a stop-loss policy to protect against unpredictable or catastrophic losses.
“To make this program politically viable, we need to make it self-sustaining,” Scanlon said. “That is the direction I am in favor of going.”
Concepts for a reinsurance program were raised during the last two years, but so far the proposal hasn’t won passage. The plan has bipartisan support this year.
Under the latest idea, legislators would use money from the state’s general fund to create a reserve to pay out large medical claims. The amount in the reserve is still up for debate, but studies have suggested the state could set aside anywhere from $20 million to $80 million for a reinsurance program. Connecticut could also pursue a 1332 waiver, which would allow it to get federal funding for the program.
Senate Minority Leader Kevin Kelly is a longtime proponent of reinsurance, but he expressed caution about the Democrats’ other proposals. Kelly said he plans to introduce his own reinsurance bill that is not tied to the other health reform measures.
He has been vocal in his opposition to a public option, and in an interview with CT Mirror, he raised concerns about the plan to revive the Health Insurance Tax.
“That’s a tax cut that was supposed to go back to the carriers. But what happens when the carriers don’t get that revenue? It’s going to be middle-class Connecticut and small businesses who are going to take it on the chin,” Kelly said. “The middle class is not resonating in this one party rule, so we need to make sure that middle-class voices are heard.”
Democrats are still negotiating with their colleagues in the General Assembly and talking to Gov. Ned Lamont, who has expressed hesitancy toward a public option. They expect to roll out a draft of the health care overhaul bill in the coming weeks.
“We’re broadening this to be an overall health care reform bill as opposed to just doing one thing,” Scanlon said. “Creating options for people to purchase health insurance, whether it be on the exchange or through a public option, is an incredibly timely proposition. Health care is way too damn expensive.”