You asked for information regarding municipalities that self-insure health care benefits for their employees, including how many have done so at any time during the last 30 years; how many currently do so, and how long they have; what their stop loss coverage is, if any; and average rate increase versus five years ago.

SUMMARY

We previously determined that the information requested is not readily available, since no source known to us has collected such data. After we discussed the request with your legislative aide, we agreed to provide you with information concerning seven municipalities that self-insure their employee health care benefits: Manchester, New Haven, Newington, Stamford, Vernon (for prescription drug and dental benefits), Westport, and Waterford. Table 1 provides information from these towns concerning their self-insured plans.

We also agreed to provide information on municipal groups that have purchased coverage through the Municipal Employees Health Insurance Program (MEHIP) since the legislature authorized the program in 1996 (PA 96-234). A total of 118 municipal groups have purchased employee health insurance through MEHIP. Of those, 88 were in effect as of November 1, 2007, including policies for 25 towns. Table 2 identifies the 118 groups and how long they have (or had) participated in MEHIP.

SELF-INSURED BENEFIT PLAN

When an employer decides to self-insure (or self-fund) employee benefits, it periodically sets aside money to cover anticipated plan losses (e. g. , claims). It may enter into an agreement with a third party administrator (TPA) to administer some or all of the plan functions (e. g. , enrollment, plan documents, claims). An insurance company may serve as the TPA, but no insurance policy is in effect. Thus, the insurer as TPA for a self-insured plan assumes no financial responsibility for risks under the plan. Under its agreement with the employer, the TPA may adjudicate and pay out on claims, but when doing so, it draws money from a bank account the employer established with its own funds.

Generally speaking, state health insurance benefit mandates do not apply to self-insured plans due to federal preemption. For more information on mandates and self-insured plans, please see the attached OLR report (2005-R-0753).

STOP-LOSS INSURANCE COVERAGE

Employers that self-insure employee health care benefits may purchase stop-loss coverage to limit their financial exposure to catastrophic or unpredictable claims. Stop-loss is an insurance product under which an insurer assumes liability for amounts above a specified threshold (or deductible, sometimes referred to as the trigger point). The stop-loss policy insures the employer sponsoring the benefit plan, not the employees the benefit plan covers.

Stop-loss coverage is available in two types: specific (or individual) and aggregate. Specific stop-loss coverage is triggered when an individual employee's claim reaches a dollar amount the employer selected. After that amount is reached, the stop-loss policy pays claims up to the lifetime limit per employee for the self-insurance medical plan. Aggregate stop-loss coverage is triggered when the self-insured employer's total group health claims reach a stipulated amount. Often, this is 125% of the self-insurer's annual estimated group health claims cost. The employer is responsible for paying claims under its self-insured benefit plan. The stop-loss insurer then reimburses the employer for any amounts owed under the stop-loss policy.

SELECT SELF-INSURED MUNICIPALITIES

We solicited information from seven municipalities that were known to self-insure their employee health care benefits: Manchester, New Haven, Newington, Stamford, Vernon (for prescription drug and dental benefits), Westport, and Waterford. Table 1 summarizes the information town employees provided, which varied by town.

Table 1: Select Self-Insured Municipalities

Table 1: -Continued-

MUNICIPAL EMPLOYEES HEALTH INSURANCE PROGRAM

MEHIP was authorized by law in 1996 and implemented in 1998 to help cities and towns provide health coverage for municipal employees (CGS § 5-259(i)). It was later opened to other groups. The law creating MEHIP requires that (1) MEHIP not affect the rates the state pays for state employee health plans and (2) the participating municipalities and other groups bear all MEHIP administrative costs. The law also prohibits MEHIP from turning away any group of employees due to past or future health care costs or claims experience. The state comptroller, who by statute oversees the program, contracts with Marsh Advantage America to administer MEHIP.

Since the program was created, subsequent legislation expanded the definition of a municipality to include regional telecommunications centers and tourism districts. It previously included towns, school districts, taxing districts, fire districts, housing authorities, regional planning agencies, transit districts, and other entities. Legislation also opened MEHIP to:

1. nonprofit corporations that do business with the state,

2. community action agencies,

3. personal care assistant associations,

4. small businesses,

5. individuals eligible for a retirement benefit from the Connecticut municipal employees' retirement system, and

6. federally qualified nonprofit corporations that (a) receive any public funding or (b) have federal 501(c)(5) tax-exempt status (e. g. , labor unions).

Employers purchasing group insurance through MEHIP have a choice of plans from Anthem Blue Cross and Blue Shield, Health Net, and Oxford Health Plans. The plans are fully-insured (i. e. , participating municipalities do not self-insure their employee health care benefits).

Municipal Groups Participating in MEHIP

Based on information the Office of the State Comptroller provided, it appears 118 municipal groups have purchased employee health care insurance through MEHIP since the program's inception (see Table 2 below). Such groups include towns, boards of education, housing authorities, transit authorities, and libraries, among others. Of the 118 groups, 88 were in effect as of November 1, 2007, including policies for the following 25 towns:

Ansonia, Ashford, Beacon Falls, Bethel, Bozrah, Bridgewater, Brooklyn, Chester, East Hampton, East Windsor, Franklin, Goshen, Killingworth, Middlebury, Monroe, Morris, New Hartford, North Stonington, Pomfret, Salem, Sterling, Thompson, Warren, Washington, and Woodbury.

In addition Easton, Lyme, Plymouth, Roxbury, Somers, and Voluntown purchased employee health care insurance through MEHIP in the past.

MEHIP Rate Increases

According to Karen Buffkin, an attorney with the comptroller's office, it would be a tremendous undertaking to assess the history of each groups' rates, but a general response can be given with respect to rate increases. She indicated that 2007 MEHIP renewal rates are estimated to increase by 13% to 15%. In 2006, the average increase was 7% to 9%.

Table 2: Municipal MEHIP Groups since 1998 as of 11/01/2007

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