OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
sHB-6710
AN ACT CONCERNING ASSOCIATION HEALTH PLANS AND
ESTABLISHING A TASK FORCE TO STUDY STOP -LOSS
INSURANCE.
Primary Analyst: MP 3/29/23
Contributing Analyst(s): CW
Reviewer: CW
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 24 $ FY 25 $
Connecticut Health Insurance
Exchange
Resources of the
Exchange -
Revenue Loss
Potential
Significant
Potential
Significant
Insurance Dept. IF - Cost None See Below
Department of Revenue Services GF - Potential
Revenue Loss
None See Below
Note: IF=Insurance Fund; GF=General Fund
Municipal Impact: None
Explanation
The bill authorizes two forms of association health plans that are not
permitted under current law: (1) a fully insured multiple employer
welfare arrangement (MEWA) that is regulated as part of the large
group health insurance market, and (2) a self-funded MEWA that
administers a health benefit plan that is not insurance.
The bill results in (1) new costs to the Insurance Department (DOI)
associated with regulating the plans beginning in FY 25, (2) a potential
revenue loss to the General Fund associated with insurance premiums
tax beginning in FY 25, and (3) a potentially significant revenue loss to
the Connecticut Health Insurance Exchange (“exchange”) beginning in
FY 24. 2023HB-06710-R000330-FN.DOCX Page 2 of 4
The bill also creates a task force to study stop loss insurance and
report on its findings and recommendations by February 1, 2024, which
is not anticipated to result in a fiscal impact.
State Regulation Cost
The total annual costs for state regulation of self-funded MEWAs will
depend on the number of such entities that are established; however,
the cost per year to DOI is anticipated to be approximately $17,000 each.
Due to the effective date of the bill and time necessary for DOI to adopt
licensing regulations, these costs are not anticipated to begin until FY
25.
1
The estimate reflects the staff time, at both analyst and supervisor
hourly rates, anticipated to be required to handle the new volume of
work, including time spent: (1) performing quarterly analysis and
review, (3) reviewing requests for approvals, and (3) meeting with the
companies as needed.
To the extent many such self-funded MEWAs are established, DOI
would incur costs by hiring additional staff, resulting in salary and
fringe benefit costs to the Insurance Fund. If the number of MEWAs is
small, the agency is likely to rely on consultants to supplement staff
capacity, resulting in contract costs of approximately $17,000 per entity
annually.
The bill requires the DOI to adopt implementing regulations, which
has no fiscal impact because the agency has the necessary expertise. The
bill does not specify licensing and filing fees, therefore any revenue gain
associated with those activities would result from the regulations.
State Tax and Exchange Revenue Impacts
The bill may result in a change to the amount of net direct written
premiums in the fully insured small group market beginning in FY 24,
to the extent small employers currently purchasing that insurance begin
1
Fully insured MEWAs are not anticipated to increase DOI costs. 2023HB-06710-R000330-FN.DOCX Page 3 of 4
participating in the two types of association health plans permitted
under the bill.
2
Significant uptake of self-funded MEWAs by small employers
currently in the fully insured market could reduce the total amount of
net direct written premium that is taxed by the state beginning in FY 25,
as health plans offered by self-funded MEWAs are not an insurance
product.
3
The insurance premiums tax is levied at a rate of 1.5% on all net direct
premiums underwritten. The Department of Revenue Services collected
$204.7 million from the insurance premiums tax in FY 22; it is uncertain
how much of that revenue is from policies that could be affected by the
bill.
Significant uptake of either type of MEWA could reduce exchange
revenue substantially by reducing the base for its marketplace
assessment. The operations of the exchange are almost entirely funded
by its marketplace assessments, which are charged at a rate of 1.65% on
premiums in the fully insured individual and small group markets.
The exchange marketplace assessment totals approximately $31.4
million for FY 23, with small group premiums accounting for 48% of
that revenue (approximately $15.2 million). If there was a 10% reduction
in fully insured small group premiums as a result of the bill, exchange
revenue would be anticipated to decrease by approximately $1.5
million. For context, fully insured small group plan enrollment was
107,652 in 2021.
4
Given that fully insured small group market enrollment has been
2
Because self-funded MEWAs cannot operate without a license and DOI must adopt
licensing regulations, shifts of insurance premiums to self-insured MEWAs are
unlikely to occur before the last quarter of FY 24.
3
Significant uptake of fully insured MEWA benefit plans would shift current spending
on insurance premiums in the small group market to the large group market, which is
not part of the base for the exchange’s assessment.
4
Connecticut Insurance Department, 2022 Consumer Report Card on Health Insurance
Carriers. Individual plan enrollment was 109,471 in 2021. 2023HB-06710-R000330-FN.DOCX Page 4 of 4
decreasing in recent years, further enrollment reductions from the bill
could contribute to a smaller, deteriorating risk pool for those small
employers remaining in the fully insured small group market.
Insurance Fund Assessments
The bill does not impact the revenue to be collected by the three
assessments that support the Insurance Fund (i.e., the general
assessment, the Health and Welfare Fee, and the Public Health Fee),
except to the extent that more revenue is needed to support DOI costs
for regulating self-funded MEWAs. These assessments begin with the
total amount of revenue needed and divide responsibility for that total
amount amongst insurers, HMOs, and in the case of the Health and
Welfare Fee, third-party administrators on behalf of the self-funded
plans they administer.
The Out Years
The annualized ongoing fiscal impact identified above would
continue into the future subject to: (1) inflation, (2) the number of self-
funded MEWAs that get licensed by DOI, (3) shifts in insurance
coverage from the fully insured small group market to both the self-
funded and large group markets, and (4) changes in employee wage and
benefit costs, to the extent DOI hires new staff.