OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
SB-364
AN ACT CONCERNING HEALTH INSURANCE.
AMENDMENT
LCO No.: 5942
File Copy No.: 315
Senate Calendar No.: 234
Primary Analyst: MP 4/29/22
Contributing Analyst(s): CP, RJW (NF)
OFA Fiscal Note
See Fiscal Note Details
The amendment strikes the underlying bill and its associated fiscal
impact and results in the fiscal impacts described below.
State Reinsurance Program
The amendment requires the Office of Health Strategy (OHS) to seek
a Section 1332 state innovation waiver to establish a reinsurance
program designed to lower premiums for the individual health
insurance market. The amendment specifies that if the waiver is
granted, the Treasurer must annually pay the amount needed to fund
the program, up to $21.21 million, and that the Health Reinsurance
Association (HRA) will administer it.
1
This results in the following
fiscal impacts:
• a General Fund cost of up to $21.21 million per year beginning
in FY 24 to fund the state reinsurance program, conditional on
a federally approved 1332 waiver being in place,
1
HRA is an existing nonprofit association that all health insurers, health care centers,
and self-insurers must belong to as a condition of offering health insurance in
Connecticut. Depending on the reinsurance program’s complexity, the annual cost for
HRA to administer the program is estimated to range from $150,000 to $500,000, which
is the cost for a third-party administrator to manage the reinsurance program
operations (e.g. processing claims). 2022SB-00364-R00LCO05942-FNA.DOCX Page 2 of 3
• a cost to OHS of at least $100,000 in FY 23 for a consultant to
apply for the waiver,
• an annual revenue gain of federal funding, beginning in FY
24 or later, and
• a potential change to state insurance premiums tax revenue.
Generally, Section 1332 waiver programs generate significant new
state revenue from the federal government (known as "pass-through"
funding) which can partially fund a state's program. The actual revenue
gain will depend on how much the program reduces federal premium
tax credits for Connecticut Health Insurance Exchange enrollees.
2
Any
such revenue would be received annually while the waiver was in effect,
after the waiver was applied for and approved.
A reinsurance program may change the total amount of net direct
premiums written in Connecticut, and through that, may change
collections of the state's 1.5% insurance premiums tax. Lower direct
written premiums, due to per-policy cost reductions from reinsurance,
would proportionately lower tax revenue, but increased enrollment,
due to lower prices, may offset any such direct written premium
reductions. The Department of Revenue Services collected $202.3
million from the Insurance Premiums Tax in FY 21; it is uncertain how
much of that revenue is from policies that could be affected by the
reinsurance provision under the amendment.
Pharmacy Benefit Managers (PBM) Report
The amendment also results in a potential cost of up to $500,000 to
the Insurance Department in FY 23. The amendment requires the
Insurance Department (DOI) to prepare and submit a report to the
Insurance and Real Estate Committee by January 1, 2023, which must
include an analysis of PBMs' use of spread pricing arrangements,
2
https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-
Waivers/Section_1332_State_Innovation_Waivers-
#Application%20Tools%20and%20Resources 2022SB-00364-R00LCO05942-FNA.DOCX Page 3 of 3
manufacturing rebates and transparency and accountability. If the
agency can collect sufficiently detailed information from PBMs as
would be required for an in-depth analysis, it is anticipated that DOI
would hire a consultant with expertise in drug pricing and PBM drug
distribution practices to prepare the report at a cost of up to $500,000.
The cost would depend on the complexity of the analysis.
State Purchasing Pools Report
The provisions requiring the Department of Public Health and State
Comptroller to prepare and submit a report have no fiscal impact since
the agencies have enough expertise within existing staff resources to
conduct the study.
The preceding Fiscal Impact statement is prepared for the benefit of the members of the General Assembly, solely
for the purposes of information, summarization and explanation and does not represent the intent of the General
Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of
informational sources, including the analyst’s professional knowledge. Whenever applicable, agency data is
consulted as part of the analysis, however final products do not necessarily reflect an assessment from any
specific department.