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You may not have heard the story about the big corporation that sold health insurance coverage for Connecticut local government workers at prices below their costs — running up tens of millions of dollars in debt, and then landing a bailout from the feds.
That’s because it wasn’t a corporation. It was our own state government.
About 10 years ago, Connecticut began letting towns and cities buy into an employee healthcare plan that’s essentially the same generous insurance coverage that state workers get. The program, known as the Partnership Plan, ramped up around 2016, and was soon covering thousands of local government employees and their families. It was run, of all places, by the state comptroller’s office, an elected post tasked with overseeing the state’s cash drawer.
In many cases, the plan offered lower premiums, lower deductibles, and comparable (if not better) benefits than municipal officials received from insurance companies.
If it sounded too good to be true, that’s because it was. From early 2017 to mid-2019, the Partnership Plan hemorrhaged cash.
Toward the end of that time, the Plan was losing more than $4 million each month under a discounting scheme that helped it scoop up customers. The Partnership Plan did especially well in southwest Connecticut because, unlike private insurers, it initially charged the same premium everywhere in the state; the perceived “savings” were largest in the region with the highest cost of living.
If an ordinary insurance company had concocted anything remotely like this, state regulators would have shut it down almost immediately. But because the Partnership Plan operates mostly outside state insurance rules, it was able to use creative accounting.
First, state officials tended to take their time paying hospitals and other healthcare providers, meaning it didn’t need to have cash available to pay claims right away.
Second, the Plan has added new municipalities (and new enrollees) aggressively. Each time another new person bought coverage from the Partnership Plan, the operators could pocket his or her premium payments immediately, while waiting a few months before paying for that person’s covered doctor visits or prescriptions.
With questions swirling about its creative accounting, the Partnership Plan began cleaning up its act and hiked premiums by calculating them for each county. Former state comptroller Kevin Lembo, then the person in charge of the plan, insisted that revenues were more or less matching expenses.
What about when they hadn’t been? State officials can’t (or won’t) say how much taxpayers would owe if the Plan shut down tomorrow. The public, however, got a general idea when the state quietly sank nearly $40 million of federal COVID relief money into paying off some of the debt, albeit under the auspices of covering COVID costs.
Even with that bailout, the trouble isn’t over for Connecticut taxpayers. For one thing, the Partnership Plan is still running. And it wasn’t constructed just to help school cafeteria workers and highway crews get better coverage. For years, its proponents have had their eyes on a bigger prize: if the state could sell insurance to mayors and first selectmen, it could offer it to businesses and individuals, too.
This idea, dubbed “the public option,” has been kicked around in Hartford for much of the past decade. If only the state could use its heft to enter the insurance market and compete with private insurers, proponents contend, it could drive down prices for everyone.
The problem with that argument, of course, is that state officials have already shown what their idea of competition looks like — and it comes with a big price tag for taxpayers.
Getting into the insurance business is a risky business that Connecticut cannot afford, especially when the person charged with setting the premiums would face the voters every four years.
Instead of expanding the Partnership Plan, state lawmakers should close the books—and tell taxpayers once and for all how much they’ve lost on the deal.
Carol Platt Liebau
President
Yankee Institute