You asked (1) for the status of the Municipal Employees Health Insurance Plan (MEHIP), (2) whether MEHIP uses reinsurance, (3) whether MEHIP policies are exempt from premium tax, and (4) policy options to encourage more small employers to purchase insurance through MEHIP.

SUMMARY

MEHIP is a group health insurance program for municipal employees sponsored by the Office of the Comptroller and established by law. Subsequent laws expanded MEHIP eligibility to (1) nonprofit community action agencies, (2) state-contracted nonprofit corporations, (3) regional emergency telecommunications centers and tourism districts, and (4) small employers.

As of December 6, 2004, MEHIP covered 190 groups consisting of 15,000 lives, according to the Comptroller’s office. This compares to 114 groups in February 2003. (The Comptroller’s office is in the process of determining how many lives were covered in February 2003, as a further comparison. ) Current covered groups include 164 nonprofit corporations, 19 municipal groups, and five small employers. An additional 10 municipal groups with 1,200 lives are expected to join in early 2005.

Carriers can purchase reinsurance for MEHIP policies issued to small businesses from the Connecticut Small Employer Health Reinsurance Pool. Carriers do not have access to the reinsurance pool for MEHIP policies issued to municipal groups and nonprofit organizations.

State law exempts contracts or policies issued to employees of municipalities and nonprofit organizations from the 1. 75% health maintenance organization (HMO) premium tax. Policies issued to small employer groups through MEHIP are not exempt from the tax. Policies issued through MEHIP are not exempt from the 1. 75% insurance company premium tax.

Providing incentives (e. g. , tax exemptions), reducing plan costs, and offering more flexible benefit designs, including a special benefit plan for employers with fewer than 10 employees, are possible options to encourage small employers to purchase insurance through MEHIP, according to the Comptroller’s office.

MEHIP

MEHIP is a group health insurance program for municipal employees sponsored by the Office of the Comptroller and established by law (PA 96-234; CGS §5-259(i)). Subsequent laws expanded MEHIP eligibility to (1) nonprofit community action agencies (PA 99-124), (2) state-contracted nonprofit corporations (PA 01-30), (3) regional emergency telecommunications centers and tourism districts (PA 03-254), and (4) small employers (PA 03-149).

For additional background on MEHIP, see OLR Reports 2004-R-0976, 2004-R-0382, 2003-R-0213, and 2001-R-0482 (copies attached).

REINSURANCE

Carriers can purchase reinsurance for MEHIP policies issued to small businesses from the Connecticut Small Employer Health Reinsurance Pool. For more information on the small employer reinsurance pool, see OLR Report 2005-R-0026 (copy enclosed). A small employer has no more than 50 employees and includes a self-employed person, but excludes municipalities and nonprofit organizations obtaining health insurance through MEHIP (CGS § 38a-564(4)). These groups were excluded from the definition of “small employer” because they are exempt from the small employer group rating law, according to the Comptroller’s office. As a result, carriers do not have access to the reinsurance pool for MEHIP policies issued to municipal groups and nonprofit organizations.

The small employer group rating law requires insurers to use modified community rating for small employer policies (CGS § 38a-567(5)). Community rating is the process of developing a uniform rate for all enrollees. Modified community rating adjusts the uniform rate for specific case characteristics. “Case characteristics” means demographic or other objective characteristics of a small employer, including age, sex, family composition, location, size of group, administrative cost savings resulting from the administration of an association group plan or a plan written through MEHIP, and industry classification (CGS § 38a-564(27)).

PREMIUM TAX

HMOs are subject to an annual premium tax per contract or policy of 1. 75% (CGS § 12-202a(a)). State law exempts contracts or policies issued to employees of municipalities and nonprofit organizations from this HMO premium tax (CGS § 12-202a(b)(7) and (8)). Policies issued to small employer groups through MEHIP are not exempt from it.

Insurance companies are subject to an annual premium tax per contract or policy of 1. 75% (CGS § 12-202). Policies issued through MEHIP are not exempt from this tax, based upon statutory language. The Comptroller’s office is in the process of confirming whether this tax is in fact being paid for policies issued through MEHIP.

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