OFFICE OF FISCAL ANALYSIS
Legislative Office Building, Room 5200
Hartford, CT 06106 (860) 240-0200
http://www.cga.ct.gov/ofa
sSB-8
AN ACT CONCERNING DRUG AFFORDABILITY.
AMENDMENT
LCO No.: 4940
File Copy No.: 309
Senate Calendar No.: 197
Primary Analyst: MP 4/30/24
Contributing Analyst(s): ()
Reviewer: JS
OFA Fiscal Note
State Impact:
Agency Affected Fund-Effect FY 25 $ FY 26 $ FY 27 $
Insurance Dept. IF - Cost See Below See Below See Below
Insurance Dept. IF - Revenue Gain See Below See Below See Below
Insurance Dept. GF - Potential
Revenue Gain
Minimal Minimal Minimal
Department of
Revenue Services
GF - Revenue
Impact
None Potential Potential
Connecticut
Health Insurance
Exchange
EF - Revenue
Impact
None None Potential
Note: IF=Insurance Fund; GF=General Fund; EF=Enterprise 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 a self-funded multiple employer welfare
arrangement (MEWA) trust, once licensed by the Insurance Department
(DOI), to administer a health benefit plan that is not insurance but must
follow most of the rules for health insurance companies in the state. It
also permits associations of small employers purchasing health
insurance in the fully insured market to be subject to large group rating
rules in certain circumstances. 2024SB-00008-R00LCO04940-FNA.DOCX Page 2 of 5
The amendment results in: (1) costs and offsetting revenue to DOI
associated with regulating the self-funded MEWA trusts beginning as
early as FY 25, (2) a potential minimal revenue gain to the General Fund
from license and filing fees of any new entities formed, (3) a potential
revenue impact to the General Fund associated with insurance
premiums tax beginning in FY 26, and (4) a potential revenue impact to
the Connecticut Health Insurance Exchange (“exchange”) beginning in
FY 27.
The amendment also requires self-funded MEWA trusts to report
claims data to the all-payer claims database, which has no 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 exceed $17,000 each.
1
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 will be mostly offset by Insurance
Fund revenue gains to the agency.
2
Costs related to regulating self-funded MEWA trusts could be
incurred beginning in FY 25, as the amendment allows them to apply
for a license beginning as early as October 1, 2024, and to start offering
health benefit plans, once licensed, beginning April 1, 2025. The entities
will bear the cost of the contracted services of attorneys, appraisers,
independent actuaries, independent certified public accountants, or
other professionals required to supplement agency staffing in order to
complete their financial examinations and market conduct reviews.
They will also be billed for Insurance Department staff time in
1
$17,000 per trust reflects the staff time, at both analyst and supervisor hourly rates,
anticipated to be required to handle the new volume of work associated with quarterly
financial analysis of one such entity. A typical market conduct examination is
approximately $100,000, which would typically be done once every three to five years.
2
Associations of small employers purchasing in the large group market are not
anticipated to increase DOI costs, as the insurers selling such plans are already
regulated by DOI. 2024SB-00008-R00LCO04940-FNA.DOCX Page 3 of 5
connection with those examinations and reviews.
The amendment gives employees covered by self-funded MEWA
trusts’ health benefit plans access to the Division of Consumer Affairs 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. One additional Health Unit insurance examiner at a
cost of $143,000 annually ($73,000 for salary and $70,000 for fringe
benefits) is anticipated to be required if approximately 100,000 people
become covered by the trusts.
The bill appears to require the trusts to pay the same license and filing
fees applicable to health insurance companies, which include: (1) the
pre-license document filing fee of $220, (2) the annual license fee of $200,
and (3) the annual report fee of $50. To the extent self-funded MEWA
trusts are formed and apply for licensure, the bill results in a minimal
annual revenue gain to the General Fund associated with these fees
beginning as early as FY 25.
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
The amendment may result in a change to the amount of net direct
written premiums in the fully insured market beginning in FY 25, with
a potential revenue impact beginning in FY 26, to the extent small
employers currently purchasing health insurance instead participate in
the new health plans permitted under the amendment.
3
3
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 because self-funded MEWA plans are
not an insurance product. However, if the risk pool of the small group fully insured
market deteriorates, there would be an offsetting effect in which premiums for the
remaining enrollees would rise. Enrollment in the small group market has already
been declining in recent years, with some small businesses moving to level-funded
plans (which are not part of the fully insured market). Self-funded MEWA trusts are 2024SB-00008-R00LCO04940-FNA.DOCX Page 4 of 5
The insurance premiums tax is levied at a rate of 1.5% on all net direct
premiums underwritten. The Department of Revenue Services collected
$254.3 million from the insurance premiums tax in FY 23; it is uncertain
how much of that revenue is from policies that could be affected by the
amendment.
Significant uptake of the new health plans by businesses and
organizations currently in the fully insured small group market could
also impact exchange revenue by changing the base for its marketplace
assessment beginning in FY 27. The operations of the exchange are
almost entirely funded by its marketplace assessments, which are
charged at a rate of 1.85% on premiums in the fully insured individual
and small group markets.
The exchange marketplace assessment totaled approximately $31.4
million for FY 23, with small group premiums accounting for 48% of
that revenue (approximately $15.2 million annually). For context, fully
insured small group plan enrollment was 107,652 in 2021, and 97,668 in
2022.
4
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,
premium taxes, 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
required to purchase certain insurance products (i.e., stop-loss, fiduciary liability, and
directors’ and officers’ liability).
4
Connecticut Insurance Department, 2022 & 2023 Consumer Report Cards on Health
Insurance Carriers. Individual plan enrollment was 109,471 in 2021 and 110,667 in 2022. 2024SB-00008-R00LCO04940-FNA.DOCX Page 5 of 5
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.