Contrasting Solutions as Pandemic Adds Urgency to High Insurance Costs in Connecticut

Democratic and Republican state legislators are offering very different proposals on how to deal with one of the more pressing issues facing the legislature in January: the rising cost of health insurance. 

Their proposals are not new. The cost of health insurance was a topic of debate long before the pandemic hit, but lawmakers from both parties agree that the pandemic has added urgency, and pushed government solutions to the forefront of what some until recently have treated as largely a personal problem.

“If your neighbor doesn’t have health insurance, that affects you,” said State Sen. Matt Lesser, D-Middletown, who is chair of the Insurance Committee and vice-chair of the Public Health Committee.  “It matters to me if the kids across the street don’t have insurance, because they can give me COVID.” 

For small business owners with fewer than 50 employees, having an affordable health insurance plan can mean the difference between providing health coverage and leaving their employees to navigate the system on their own. 

State Sen. Christine Cohen, D-Guilford, who is also the owner of Cohen’s Bagels in Madison, said that when she started the business in 2014, she made a point of providing her employees with health insurance, which also allowed her to attract and keep more qualified workers. 

But Cohen said that as premiums increased over the years, she has been unable to sustain the cost. Now her employees purchase their insurance from the state insurance exchange.

From 2015 to 2017, health insurance premiums increased by an average of 4.64 percent for small group plans and 8.77 for individual plans, according to the Connecticut Department of Insurance. In 2018, the insurance department approved premium increases of around 30 percent after the Trump Administration eliminated cost-sharing reductions, which help subsidize insurance costs for low-income individuals. In the following years, the magnitude of the approved increases has diminished substantially, but premiums are still going up. Between 2019 and 2021, premiums will have increased by an average of 5.71 percent for small group plans and 2.13 percent for individuals.  

Senate Republican Leader Kevin Kelly, R-Stratford, said that insurance costs were a particular problem for middle-class families, who watch as their premiums go up and up and at the same time have had to deal with job losses, high taxes and energy costs.

“This all fits under affordability,” he said. “Middle-class families are really stressed.” 

According to State Sen. Saud Anwar, D-East Hartford, who is also a medical doctor, the current high costs of health insurance are creating an atmosphere where patients see doctors only in cases of  emergency. 

“Co-pays and deductibles and bureaucracy … has stagnated physicians’ ability to take care of their patients,” said Anwar. 

If doctors had more of an opportunity to practice preventative care, said Anwar, it would reduce these emergency visits and save a significant amount of time and money. 

Mark Thompson, executive director of the Hartford and Fairfield County Medical Associations, agreed. 

“Most doctors would support anything that would increase and improve availability of health insurance,” he said. 

Anwar said that more consistent medical care would lead to a population that was more healthy overall, meaning fewer people with severe conditions, chronic conditions that are better managed and a workforce that would be able to continue going to work. 

“At the end of the day … the state of Connecticut is paying for this,” said Anwar. “If we were to pay now, we would pay far less later.” 

A public option

Lesser said that the Democrats will use this legislative session to revive prior legislation creating a public option in Connecticut. 

The idea of a public option — a way for individuals and small businesses to buy health insurance through the state rather than on the private market — has been proposed several times, and in several different forms.  

State Comptroller Kevin Lembo said that the current program would be similar to the Connecticut Partnership Program, which allows municipalities to offer local employees the same insurance available to state employees. The idea is that independent small businesses could purchase insurance plans through the state at a lower rate than would be offered through private insurers. 

According to Lembo, there are several reasons that the state could offer lower premiums, by keeping administrative costs low, and by negotiating for the lowest possible prices with a large pool of participants. 

“Small businesses have asked for this, and those that don’t want to participate don’t have to,” said Lembo, adding that this was a concrete way to help small businesses in a time when many are struggling to remain open. 

Cohen and Anwar both said they are in favor of this idea. 

“A public option encourages competition,” said Cohen, adding that it was a way of “ensuring that premium dollars are actually going to healthcare.” 

Lembo said that the Partnership Program has been a success, providing coverage to about 60,000 people through 140 groups. None, he said, have pulled out of the program.

According to Kelly and Somers, on the other hand, the Partnership Program has run at a deficit in previous years. And Kelly expressed concern that if claims exceed premiums, taxpayers will be expected to make up the difference.

Lembo said the legislation in this session will include some kind of stop loss insurance to protect against large, unexpected claims. 

The Connecticut Hospital Association also opposed the idea in its testimony at a public hearing for a previous version of the bill.

“Government payers reimburse hospitals far below the cost of care,” the testimony read. “Basing a new Public Option on government rates would destabilize the Health Insurance Exchange and the Medicaid program, and negatively impact the already fragile provision of employer-sponsored health insurance in Connecticut.” 

Others said that enabling individuals to purchase insurance through the state will put the jobs of people who work in the insurance industry at risk. 

“We’re very concerned that public option proposals are really a threat to Connecticut being the insurance capital of the world,” said Susan Halpin of the Connecticut Association of Health Plans. 

Not everyone agrees. 

“Nothing is going to happen to the insurance industry,” said Cohen. “They work across the country with a huge bulk of businesses.”   

Kelly also brought up questions about regulation: the public option would not be subject to standards under the Affordable Care Act and it would not fall under the jurisdiction of the Department of Insurance. 

And the public option would not necessarily protect individuals in the case of a recession or another pandemic-like catastrophe. Since small businesses would be the entities purchasing the insurance from the state, people without jobs would still be left without health insurance. Lembo said this was an unfortunate reality of the way the current healthcare system operates. 

Reinsurance and Benchmarking

Kelly has proposed another idea – a reinsurance program. 

Like the public option, the state reinsurance program has been proposed in the past, in both January of 2019 and January of 2020. Prior to 2016, the state participated in a transitional reinsurance program that was part of the Affordable Care Act.

The proposed state reinsurance program would set aside funds from the state budget that insurance companies could tap if claims in a given year exceed a certain amount. Having the guaranteed fund, said Kelly, would lower premiums. The more money put into the fund, Kelly said, the lower the premiums. 

A 2019 report from the actuarial consulting firm Wakely found that allocating about $20 million would result in a 5 percent premium decrease, and about $40 million would result in a 10 percent premium decrease. Kelly said he believes the funds can be taken out of the budget without having to increase taxes.

“If the state budget is a dollar, this isn’t even a penny. And you can’t find that?” he said. 

Additionally, the state could apply for a 1332 waiver under the Affordable Care Act, which would allow the state to collect funding from the federal government to support the program. 

Republicans have also proposed a benchmark program similar to what was passed by Republican Gov. Charlie Baker in Massachusetts. The idea is to bring together a group of stakeholders — representatives of the insurance industry, members of the government and patient advocates — to set standards for best practices to provide affordable and quality care. 

“It’s not just about lowering premiums,” said Kelly. “You’ve got to get your arms around the cost of health care.”

The reinsurance plan, said Kelly, would help not only small businesses, but also individuals who are paying for their own insurance. 

“I think it can do everything the public option can do,” said Kelly.

State Rep. Holly Cheeseman, R-East Lyme, agreed.

“I’m a huge proponent of stealing good ideas from other states,” said Cheeseman. “In any realm of state government, we need to see the best ideas out there.”

State Sen. Heather Somers, R-Groton, who was also a founding partner of the medical device manufacturer Hydrofera, said that insurance companies should be required to make public the amount they are reimbursing doctors for patient visits and how much they pay pharmaceutical companies. 

“Nobody really knows what the true cost of healthcare is, because you have to run it through the insurance companies,” said Somers. 

She said that benchmarking could help provide that transparency.

“It gives people an idea on what a procedure should cost,” she said. 

Lembo agreed that reinsurance was “worth discussing as part of a much larger set of solutions,” but characterized its success in other states as “mixed.”

Halpin called reinsurance an “interesting concept,” but she said that in other states it has been funded by a surcharge on employers and other premiums. She warned against “robbing Peter to pay Paul.” 

Kelly said that if enough money was directed into the general appropriations fund, there would be no need to use surcharges. 

Halpin said she doesn’t know of an ideal way to address the issue. “We’re all searching for that silver bullet, and I don’t think there is one,” she said. 

But according to Lesser, the election results proved that the time has come for a significant change.

“The status quo is not tenable right now,” he said. “[We] really have to engage in major reform.”

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