OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
HB-6710
AN ACT CONCERNING ASSOCIATION HEALTH PLANS AND
ESTABLISHING A TASK FORCE TO STUDY STOP -LOSS
INSURANCE.
AMENDMENT
LCO No.: 9466
File Copy No.: 330
House Calendar No.: 229
Primary Analyst: MP 6/2/23
Contributing Analyst(s): ()
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 24 $ FY 25 $
Insurance Dept. IF - Cost See Below See Below
Insurance Dept. IF - Revenue
Gain
See Below See Below
Insurance Dept. GF - Revenue
Gain
Minimal Minimal
Department of Revenue Services GF - Potential
Revenue Loss
None See Below
Connecticut Health Insurance
Exchange
Resources of the
Exchange -
Revenue Loss
Potential
Significant
Potential
Significant
Note: GF=General Fund; IF=Insurance Fund
Municipal Impact: None
Explanation
The amendment strikes the underlying bill and its associated fiscal
impact, resulting in the fiscal impact described below.
The amendment authorizes two forms of association health plans that
are not permitted under current law: (1) self-funded multiple employer
welfare arrangement (MEWA) trusts that administer a health benefit
plan that is not insurance but has to follow most of the rules for health
insurance companies, and (2) associations of small employers 2023HB-06710-R00LCO09466-FNA.docx Page 2 of 5
purchasing health insurance subject to large group rating rules.
The amendment results in: (1) costs and offsetting revenue to the
Insurance Department (DOI) associated with regulating the self-funded
MEWA trusts beginning as early as FY 24, (2) a potential revenue gain
to the General Fund from license fees to the extent those entities form
and pay the same license fees as health insurance companies, (3) a
potential revenue loss to the General Fund associated with insurance
premiums tax beginning in FY 25, and (4) a potentially significant
revenue loss to the Connecticut Health Insurance Exchange
(“exchange”) beginning in FY 24.
The amendment also creates a task force to study stop loss insurance
and report on its findings and recommendations by February 1, 2024,
and requires self-funded MEWA trusts to report claims data to the all-
payer claims database, which are not anticipated to result in a fiscal
impact.
State Regulation Fiscal Impacts
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 or
more each. The amendment requires that self-funded MEWAs
reimburse DOI for costs associated with their financial and market
conduct examinations, so costs to DOI under the amendment should be
mostly offset by Insurance Fund revenue gains to the agency.
1
Costs related to regulating self-funded MEWA trusts could be
incurred beginning in FY 24, as the amendment allows them to apply
for a license beginning October 1, 2023, and to start offering health
benefit plans, once licensed, beginning April 1, 2024. The entities would
bear the cost of either staff time or the contracted services of attorneys,
appraisers, independent actuaries, independent certified public
accountants, or other professionals required to supplement agency
1
Increases in fully insured associations of small employers are not anticipated to
increase DOI costs, as the insurers selling such plans are already regulated by DOI. 2023HB-06710-R00LCO09466-FNA.docx Page 3 of 5
staffing, which is estimated to cost approximately $17,000 per self-
funded MEWA trust per year.
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.
The amendment gives employees covered by self-funded MEWA
trusts’ health benefit plans access to the Consumer Affairs Division at
DOI, which could result in staff costs to the Insurance Fund, to the extent
additional staff are needed to handle the volume of complaints and
questions received.
The amendment also requires the Insurance Commissioner to make
certain judgements and determinations related to self-funded MEWA
trusts and visit and examine them every five years.
To the extent many such self-funded MEWAs are established, DOI is
anticipated to incur ongoing costs for 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 a combination of
existing staff and consultants to supplement that capacity, resulting in
contract costs that would be borne by the self-funded MEWA trusts.
The amendment also results in a minimal General Fund revenue gain
to DOI beginning in FY 24 associated with licensing fees and other filing
fees charged to health insurance companies. (The initial license fee is
$220, and the annual renewal fee is $200). The revenue gain would
depend on the number of self-funded MEWA trusts that become
licensed to offer health benefit plans under the amendment.
The amendment allows DOI to adopt implementing regulations,
which has no fiscal impact because the agency has the necessary
expertise.
State Tax and Exchange Revenue Impacts 2023HB-06710-R00LCO09466-FNA.docx Page 4 of 5
The amendment 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 participating in the association health plans permitted under the
amendment.
Significant uptake of self-funded MEWA trust health benefit plans 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 MEWA trusts
are not an insurance product.
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
amendment.
Significant uptake of association health plans 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 annually). If there was a 10%
reduction in fully insured small group premiums as a result of the
amendment, exchange revenue would be anticipated to decrease by
approximately $1.5 million per year. For context, fully insured small
group plan enrollment was 107,652 in 2021.
2
Given that fully insured small group market enrollment has been
decreasing in recent years, further enrollment reductions from the
2
Connecticut Insurance Department, 2022 Consumer Report Card on Health Insurance
Carriers. Individual plan enrollment was 109,471 in 2021. 2023HB-06710-R00LCO09466-FNA.docx Page 5 of 5
amendment could contribute to a smaller, deteriorating risk pool for
those small employers remaining in the fully insured small group
market.
Insurance Fund Assessments
The amendment does not impact the revenue to be collected by the
three assessments that support the Insurance Fund (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 MEWA trusts than what is reimbursed by the
entities. Self-funded MEWA trusts would not pay these assessments or
assessments for the Life and Health Insurance Guaranty Association.
The Insurance Fund 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 and exempt insurers on behalf of the self-funded
plans they administer.
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.