OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
sSB-842
AN ACT CONCERNING HEALTH INSURANCE AND HEALTH
CARE IN CONNECTICUT.
Primary Analyst: MP 5/10/21
Contributing Analyst(s): RDP, AN, ES, CW
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 22 $ FY 23 $
Office of the State Comptroller GF - Cost At least
600,000
See Below
Office of the State Comptroller GF - Potential
Cost
135,936 135,936
State Comptroller - Fringe
Benefits
1
GF - Potential
Cost
55,935 55,935
Connecticut Health Insurance
Exchange
CT HIEA -
Potential Revenue
Gain
Approx 50
million
Approx 50
million
Connecticut Health Insurance
Exchange
Other - Potential
Cost
Up to 15.3
million
Up to 12.5
million
Connecticut Health Insurance
Exchange
CT HIEA -
Potential Cost
Approx 50
million
Approx 50
million
Resources of the General Fund GF - Potential
Revenue Gain
None See Below
Resources of the General Fund GF - Potential
Cost
See Below See Below
Social Services, Dept. GF - Cost 36.0 million 61.3 million
Note: GF=General Fund, CT HIEA=Connecticut Health Insurance Exchange Account
Municipal Impact: None
Explanation
The bill makes various changes regarding health insurance,
including requiring the Office of the State Comptroller (OSC) to
1
The fringe benefit costs for most state employees are budgeted centrally in accounts
administered by the Comptroller. The estimated active employee fringe benefit cost
associated with most personnel changes is 41.3% of payroll in FY 22 and FY 23. 2021SB-00842-R000640-FN.DOCX Page 2 of 7
establish a group health plan for small employers, nonprofits, and
multiemployer plans and expanding eligibility for HUSKY A. The bill
also requires the Office of Health Strategy (OHS) to develop a plan to
lower consumer costs for individual-market health insurance using
funds collected from a new fee on health insurers and requires the
Connecticut Health Insurance Exchange ("exchange") to implement it.
2
The bill makes various other changes and is anticipated to result in the
fiscal impacts described below.
Sections 2 to 3 result in a cost of at least $750,000 in FY 22 to OSC
for administrative and personnel costs related to providing health
coverage to certain small employers, nonprofits, and multiemployer
plans through a fully-insured plan.
There is a cost of at least $600,000 to OSC in FY 22 for consulting
services, including actuarial and legal services, to assist with the
design and implementation of the plan, evaluate claims experience,
and to comply with the Employee Retirement Income Security Act of
1974 (ERISA). Ongoing costs beyond FY 22 will vary depending on the
continued need for such services but are anticipated to be less after
initial design and implementation. Due to the auditing requirements of
the bill, there may be a potential cost to purchase utilization and other
health-related data from the plan's carriers.
The requirements of the bill may result in a cost to OSC for two
additional benefit officers to support eligible groups who opt for
coverage under the new plan. The total annualized salary and fringe
benefit costs associated with these two positions is approximately
$191,371.
After initial design and implementation, costs related to the
administration and support for the new plan may be completely offset
by administrative fees when the plan is in place. It is anticipated that
any administrative fees charged by carriers will offset the continued
2
The exchange is a quasi-public agency that funds its operations by charging an
assessment on health carriers of 1.65% of premiums in the individual and small
group markets. This generated $34.2 million in FY 20. 2021SB-00842-R000640-FN.DOCX Page 3 of 7
cost of providing the fully-insured plan.
Some of the bill's requirements are inconsistent with a fully insured
model and it is therefore unclear if some of the costs are duplicative or
will ultimately be incurred. The bill requires that the Comptroller
purchase stop loss insurance, assess a risk fee to participants, and
assess administrative fees. These requirements are typically features of
a self-insured plan. Under a fully insured model, the administrator of
the plan would set and collect premiums, bear the plan's risk, and
assess administrative fees to participants.
Sections 5 to 7 require the Comptroller to assess the small
employers, nonprofits, and multiemployer plans participating in the
Comptroller's group health plan for a share of two existing health
insurance industry assessments, the Health and Welfare Fee and the
Public Health Fee, to be deposited in the Insurance Fund. This does not
result in a fiscal impact to the state. The bill does not change the
revenue for the Insurance Fund to be collected from these assessments,
which is based on the cost of certain Insurance Fund accounts. The
Insurance Fund general assessment, which is also determined based on
the cost of certain agencies and accounts, is also unchanged by the bill,
to be divided among domestic insurers.
There is no fiscal impact to the Office of the Healthcare Advocate
(OHA) to assist enrollees under the Comptroller's new plan like it
assists privately insured consumers, as required in section 8.
Section 9 results in a potential revenue gain of approximately $50
million in FY 22 and up to approximately $50 million in FY 23 and
annually thereafter to the "Connecticut health insurance exchange (CT
HIE) account". The CT HIE account is a separate, non-lapsing General
Fund account established pursuant to section 13 of the bill. The
revenue gain will be realized if the Insurance and Real Estate
Committee approves the plan provided by the Office of Health
Strategy (OHS) and the exchange, pursuant to section 16. The revenue
would be collected as an assessment by the Insurance Department
(DOI) on each insurer, health care center and exempt insurer to cover 2021SB-00842-R000640-FN.DOCX Page 4 of 7
the plan cost reported by OHS, which cannot exceed $50 million per
year. OHS must report that the plan cost is $50 million for 2022. There
is no anticipated cost to DOI to carry out the assessment, as it is like
others the agency collects from the same entities. In addition to the
amount of the assessment, there may be additional minimal revenue
deposited in the CT HIE account from fines or penalties assessed by
the Insurance Commissioner associated with collecting the new
assessment. There is also potential revenue to the CT HIE account from
the coverage fee to be assessed by the Comptroller pursuant to section
3, depending on plan enrollment.
3
Sections 10, 11 and 16 result in potential costs for the exchange from
the exchange's own resources and the CT HIE account (state costs),
dependent on the plan developed by OHS being approved. If the plan
is approved, the exchange would incur costs, presumably from its own
resources, of (1) at least $100,000 in FY 22 for an actuarial report to
support the state's application for a Section 1332 State Innovation
Waiver
4
and (2) up to $14.4 million in FY 22 and up to $12.5 million
annually thereafter to establish the subsidiary exchange and operate
it.
5
Using funds in the CT HIE account, the exchange would incur the
following state costs:
(1) up to $25 million annually for subsidies for people ineligible to
buy qualified health plans (QHP) on the exchange,
3
The amount would equal the amount of the Insurance Fund fee a domestic
insurance company would pay for providing the same amount of fully-insured
coverage as the Comptroller under the new plan. The Insurance Fund fee is set to the
amount required to fund certain appropriations less the fund balance and was $33.2
million for FY 21. It applies to all types of admitted domestic insurers (including life,
property and casualty, etc.).
4
$100,000 reflects the cost of a report to support a waiver for a reinsurance program;
there may be additional consulting services costs to demonstrate that other proposed
program aspects meet the federal requirements for state innovation waiver approval.
5
Most anticipated costs are for technology and vendor contracts for operations. The
ability for the exchange to leverage existing functionality is anticipated to be limited
by rules in the federal Affordable Care Act (ACA). 2021SB-00842-R000640-FN.DOCX Page 5 of 7
(2) up to $20 million annually to fund a reinsurance program,
6
(3) $1.7 to $3.5 million in FY 22 and $5.3 to $7.5 million in FY 23 to
eliminate premium costs for exchange enrollees with household
incomes up to 200% of the federal poverty level (FPL).
7
(4) significant costs, the amount of which is dependent on the
design of the program, to reduce the cost of premiums and cost-
sharing for exchange enrollees with household incomes greater
than 200% FPL and any other actions necessary to implement the
Section 1332 waiver program if federal approval for it is granted.
As an example, the cost for an average subsidy of $1,000 for the
approximately 75,000 exchange enrollees with household
incomes above 200% of FPL would be $75 million, excluding
administration.
As the state costs could easily exceed the moneys available in the CT
HIE account designated by the bill to pay for these requirements
(approximately $50 million), it is unclear what aspects of the plan
would be funded and at what level.
These sections may also result in a revenue gain to the General Fund
beginning as early as FY 23. Generally, Section 1332 waiver programs
generate new state revenue from the federal government (known as
"pass-through" funding) which can partially fund the program. The
amount is based on how much the program reduces federal premium
tax credits for Connecticut exchange enrollees. Previous research has
estimated that a reinsurance program with a state investment of $19.5
million could generate $23 million or more in federal pass-through
6
The cost of a reinsurance program is primarily for reinsurance payments but would
also include $150,000 to $500,000 in annual expenses for administration, depending
on program complexity and assuming the Health Reinsurance Association would
operate the program through a third-party administrator.
7
These estimates include the impact of temporarily increased federal subsidies for
exchange enrollees in 2021 and 2022 and reflect the assumption that exchange
enrollees likely to be eligible for HUSKY A under the bill will switch to that
coverage. Premium inflation of 2% and 5% over 2021 rates is assumed for FY 22, and
FY 23 costs, respectively. Future year costs would be higher unless the increased
federal subsidies are extended. 2021SB-00842-R000640-FN.DOCX Page 6 of 7
funding.
8
Any such revenue would be received annually while the
waiver was in effect, after the waiver was applied for and approved.
Section 14 may result in a cost to the state going forward pursuant
to the federal Affordable Care Act (ACA) for costs related to the
coverage of blood pressure monitors and peak flow meters under QHP
sold on the exchange.
9
While most of the mandated benefits in Section
14 are understood to be included in the benchmark plan, and therefore
not anticipated to trigger any ACA-required defrayment of the
premium cost for exchange enrollees, coverage under the benchmark
plan for blood pressure monitors and peak flow meters is understood
to be restricted to enrollees participating in certain carrier programs.
To the extent that expanding coverage of those devices to all those
specified in the bill results in higher premium costs, the state will be
responsible for the corresponding premium increases in exchange
plans, which are not expected to be significant.
Section 16, which also requires that OHS submit a report, made in
consultation with the Department of Social Services (DSS) and the
exchange, on whether or not the state should seek a Section 1115
waiver, is not anticipated to result in a fiscal impact to OHS, nor are
other provisions of the bill.
Section 17 results in a cost to DSS of approximately $36 million in
FY 22 and $61.3 million in FY 23 associated with increasing income
eligibility under HUSKY A to 206% of the federal poverty level (FPL)
from 160% FPL, inclusive of the income disregard.
10
8
Research by Wakely Consulting Group, LLC. commissioned by the exchange and
reported in February 2020. Note that such estimates may no longer be accurate due to
significant shifts in the individual insurance market from the COVID-19 pandemic
and changes to federal subsidies under the American Rescue Plan.
9
The ACA requires that QHP offered on the exchange include the federally-defined
essential health benefits package (EHB). States can mandate benefits in excess of the
EHB, however if the benefits are not already covered under the state's benchmark
plan, federal law requires the state to defray the cost of any such additional
mandated benefits for all plans sold in the exchange, by reimbursing the carrier or
the insured for the excess coverage.
10
The 5% income disregard under modified adjusted gross income (MAGI)
standards effectively makes 201% equal 206% FPL. 2021SB-00842-R000640-FN.DOCX Page 7 of 7
Section 18 results in a cost to the exchange, from its own resources,
of up to $750,000 for technology upgrades to its system necessary for
receiving referrals from the Labor Department and determining
eligibility for coverage or assistance of those applying for
unemployment compensation benefits.
The Out Years
The fiscal impacts identified above will continue subject to approval
of the OHS plan, enrollment in the Comptroller's group health plan,
enrollment and premiums in the individual health insurance market
on the exchange and its subsidiary exchange, federal approval of a
Section 1332 waiver, actual savings to the federal government under
an approved Section 1332 waiver, federal action on health insurance
subsidies, and the number of newly eligible individuals and associated
costs under HUSKY A.
Sources: ConnectiCare benchmark plan and formulary documents
Connecticut Health Insurance Exchange
Department of Social Services
Office of the State Comptroller