You asked six questions about SB 508 and what would happen if the comptroller chooses to place participants of the Municipal Employees Health Insurance Plan (MEHIP) in an insurance risk pool. Below are a summary of the bill and an overview of MEHIP followed by our answers to your questions.

SB 508 AND MEHIP

This bill gives the state comptroller the option to place small employers participating in MEHIP in an insurance risk pool rather than have the risk fully underwritten by insurance companies. Under current law, small employers in MEHIP are fully underwritten by one of the three insurance carriers that provide health insurance to state employees and the small employer premium is determined by using the statutorily required community rating system. Also under current law, the comptroller has the discretion to use either full underwriting or the risk-pool method to provide insurance for the other groups that can choose MEHIP (employees of municipalities, nonprofit corporations, community action agencies, members of personal care assistant associations, and individuals eligible for a federal health coverage tax credit).

The comptroller’s office interprets the risk-pool option to mean any MEHIP risk pool would be self-insured (CGS § 5-259(i)). The statute does not provide guidance regarding when to form a risk pool in MEHIP and currently the comptroller does not have any MEHIP participants in a risk pool.

The MEHIP program allows the comptroller to arrange for insurance coverage for the groups named in statute under the law authorizing her to do the same for state employees. By law, the MEHIP plan (1) is separate from the state employee plan, (2) cannot affect the state employee plan premiums or coverage, and (3) is available to any group it is authorized to cover regardless of past or future health care costs or claims experience. The bill and the OLR analysis of it are at http: //cgalites/2004/fc/2004SB-00508-R000341-FC. htm.

Does the comptroller’s current authority to put MEHIP participants in a risk pool mean one large pool is created for all MEHIP or do different groups, such as municipal employees, each get their own pool?

The Comptroller’s Office interprets the statutory language to permit putting each group in its own risk pool. But this would not be practical since the total number of MEHIP participants is relatively small (approximately 13,000) and separate risk pools would be smaller still.

Risk benefit analysis generally underpins any decisions about whether to remain fully underwritten or to self-insure through a risk pool, said Karen Buffkin, the comptroller’s legal counsel. To be actuarially sound, a self-insured risk pool needs a large participant base and is typically only created when the participant group has a reasonably positive risk rating (i. e. has a low claims history). If the risk is sufficiently high, it makes sense to remain fully underwritten with the insurance companies bearing the risk, she stated. Companies set premiums at rates that minimize the companies’ exposure to loss.

Could creating a risk pool result in adverse selection by which high claim-rate groups are more likely to enter the plan?

High claim rate groups are likely to join MEHIP whether or not the comptroller chooses to form a risk pool. The existing MEHIP statute provides that “no group of employees shall be refused entry into the plan by reason of past or future health care costs or claim experience,” which means MEHIP cannot refuse a group that has proven to be high risk (CGS § 5-259(i)). This means MEHIP will often be selected by those with high claims experience, as it was intended.

If a MEHIP risk pool is created must the benefits for those in the pool be the same as those offered under the original MEHIP plan?

The benefits are not required to be the same. The law provides that MEHIP can offer plans that vary from the state employee plan regardless of whether they are in a risk-pool plan or fully underwritten plan. Similarly, there is no requirement that all MEHIP plans offer the same benefits. In practice, the MEHIP plans are largely similar to each other and they are similar to the state employee plan.

The comptroller arranges for MEHIP plans through the same providers that offer coverage for state employees: Anthem, Health Net, and ConnectiCare. Buffkin said the MEHIP plans vary a little from what is offered to state employees depending upon what the group joining MEHIP is looking for. There can also be variation from one MEHIP plan to another regarding copays and certain optional benefits. All the plans allow employees to choose different levels of coverage and different types of plans including open access HMO, gatekeeper HMO, and point-of-service plans.

What do lines 42 through 47 in SB 508 mean?

These lines allow the comptroller to create a MEHIP risk pool for small businesses (or to place them in an overall MEHIP risk pool). Under current law small businesses must be underwritten in accordance the small employer community rating method. The comptroller would not decide if individual agencies or organizations in a certain category are either fully underwritten or put in a risk pool; she would treat all organizations in a category, such as non-profits, the same.

What is a community action agency as referred to in the bill?

The bill and the MEHIP law use the definition of a community action agency defined elsewhere in statute: “a public or private nonprofit agency which has previously been designated by and authorized to accept funds from the federal Community Service Administration for community action agencies under the Economic Opportunity Act of 1964 or a successor agency” (CGS §17b-885).

What do lines 111 to 117 in the bill mean?

This portion of the bill makes conforming changes to the insurance statutes so a small business obtaining insurance under MEHIP on a risk-pooled basis is excluded from the definition of small employer under the insurance statute. The insurance statutes provide that small businesses must be underwritten with community rating method.

This portion also makes additional conforming changes so other entities permitted to obtain MEHIP insurance (community action agencies and individuals eligible for a health coverage tax credit) cannot also be considered small employers under the insurance statutes.

JM: ro