OLR Bill Analysis
AN ACT ESTABLISHING THE CONNECTICUT HEALTHCARE PARTNERSHIP.
This bill allows municipalities, certain municipal service contractors, nonprofit organizations, and small businesses to join the state employee health insurance plan for their employees and retirees. Under it, all new employees will be pooled together with state employees in the state insurance plan.
It requires the comptroller to provide insurance coverage for these employers when they apply to cover all their employees. When an employer only seeks to cover some employees, the comptroller can delay coverage if the Health Care Cost Containment Committee (HCCCC) certifies to her that the delay is necessary to prevent the employer from disproportionately shifting part of its medical risks to the state plan. When an employer seeks coverage for its retirees the comptroller is under the same deadline to provide coverage but can deny coverage if the HCCCC certifies that a denial will prevent disproportionate risk shifting.
The bill requires that premiums the municipal and other employers pay be the same as those the state pays for the same insurance plans. It allows municipalities to require an employee contribution toward the premium. It also permits the comptroller to charge participating employers an administrative fee based on a per member plan, per month basis.
Under the bill, employers joining must commit to participate in the state plan for three years, at the end of which they may renew for another three years. The bill specifies that the comptroller is not required to offer coverage from each vendor now participating in the state plan.
If an employer fails to make premium payments, the state can charge interest at the prevailing rate. In the case of a municipality, it can also withhold grants or other assistance to the town until the premiums are paid.
The bill requires the State Employees' Bargaining Agent Coalition (SEBAC) to consent to adding new employees to the state plan before the plan can be opened up. SEBAC is the bargaining coalition that negotiates state employee health and retirement benefits for all state unions.
The bill also establishes a Municipal Health Care Advisory Committee and a Private Sector Health Care Advisory Committee to each make recommendations concerning municipal and private sector coverage, respectively, to the Health Care Cost Containment Committee, created through the SEBAC agreement.
It also requires the comptroller to submit a report to the General Assembly with recommendations on how the state employee health plan can be further expanded to include individuals not authorized under the bill.
EFFECTIVE DATE: January 1, 2009, except the definitions, the provision creating the advisory committees, and the SEBAC approval are effective upon passage.
§ 1 – COVERED EMPLOYERS AND EMPLOYEES
The bill includes definitions for the employers and the employees it allows into the state employee health plan.
"Nonstate public employer" is a municipality or other political subdivision of the state, including a board of education or a quasi-public agency or public library. A nonstate public employee is a regular employee or elected officer of a nonstate public employer.
"Municipal-related employer" is any property management business, food service business, or school transportation business that is under contract with a nonstate public employer. A municipal-related employee is an employee of a municipal-related employer performing services under a “nonpublic contract” (this apparently was intended to say “nonstate public contract”).
"Small employer" is any person, firm, corporation, limited liability company, partnership or association actively engaged in business or self-employed for at least three consecutive months who, on at least 50% of its working days during the preceding year, employed no more than 50 eligible employees, as described in the bill, the majority of whom were employed within this state. Small employer does not include a town or other state political subdivision.
"Nonprofit employer" is a nonprofit corporation, as defined by law. It does not include a town or other state political subdivision.
It specifies that “eligible employees” exclude employees covered through their employer by health insurance plans or insurance arrangements issued to or in accord with a trust established through collective bargaining under the federal Labor Management Relations Act. In determining the number of eligible employees, companies which are affiliates, as defined in state business law as being under the control of another business, or which are eligible to file a combined tax return under state corporation business tax law must be considered one employer.
§ 2 – OPENING THE STATE EMPLOYEE HEALTH PLAN
By law, the comptroller solicits bids and enters into contracts with insurance carriers to provide health insurance for state employees and retirees. The bill requires the comptroller to offer insurance coverage for municipalities, other political subdivisions of the state, certain municipal service contractors, nonprofit organizations, and small businesses when they apply to cover all or some of their employees.
It specifies that the comptroller is not required to offer coverage from every vendor the state has under contract to provide insurance for the state plan.
The bill establishes two different processes for coverage to begin depending upon whether the employer submitting the application seeks coverage for all or some of its employees.
If the application covers all of an employer's employees, the comptroller must begin coverage no later than the first day of the second calendar month following such application. This means if an application arrives anytime in January, the coverage must start March 1.
If the application covers some of an employer's employees, the coverage must begin no later than the first day of the second calendar month following such application as long as the comptroller has not been officially informed that the employees proposed for coverage constitute a disproportionate shift of the employer's medical risks to the state plan.
Under the bill, the comptroller can delay coverage if the HCCCC certifies to her that a delay is needed to prevent the applying employer from shifting a significantly disproportional part of its medical risks. The delay can continue until the employer seeks to have all of its employees covered by the state plan. Although the bill sets a deadline for coverage, it does not set a timeframe for information to go to the HCCCC so it can make a decision about risk shifting and does not set a deadline for HCCCC to make a decision and report back to the comptroller. Furthermore, it does not indicate what information would be used to determine if risk shifting would occur.
In the instance when an employer seeks to cover some of its employees, the bill does not provide a limit or any guidance on how an employer can choose who it wants to be covered.
Private Sector and Federal Law
For all of the private sector employers covered under the bill (i. e. , small businesses, nonprofits, and municipal-related employers), they cannot join the plan if the comptroller determines that their participation would subject the plan to the requirements of the Employee Retirement Income Security Act of 1974 (ERISA), unless the comptroller further determines the state plan complies with ERISA. ERISA is a federal law that sets standards, including fiduciary responsibilities, for most voluntary private-sector retirement plans and employer-sponsored health plans.
§§ 2 & 4 – PREMIUMS, ADMINISTRATIVE FEE, AND EMPLOYEE COST SHARING
The bill requires that premiums employers, other than small employers, pay be the same as those the state pays for the same insurance plans. Each employer must pay the comptroller an amount each month that she determines for the coverage.
The bill permits an employer to require covered employees to contribute a portion of the cost of the employee's coverage under the plan, as may be required under any applicable union contract.
It also permits the comptroller to charge participating employers an administrative fee based on a per member plan, per month basis.
Small Employer Premium May Vary
The bill permits an insurance carrier to adjust the rate charged to small employers for a particular health care product under the state plan to reflect one or more of the community rating characteristics identified in state insurance law. They include:
1. age, provided age brackets of fewer than five years are not permitted;
3. geographic area;
4. industry, within certain variation limits;
5. group size, within certain variation limits;
6. administrative costs savings as a result of being part of the state plan;
7. profit reduction as a result of being part of the state plan; and
8. family composition, with certain limits.
§ 3 – RETIREES
Employers eligible under the bill may also seek coverage for their retirees. The coverage must be provided no later than the first day of the second calendar month following such application, as long as the HCCCC has not informed the comptroller that the retirees proposed for coverage constitute a disproportionate shift of the employer's medical risks. If the HCCCC provides this notice, the comptroller may deny coverage to the extent that the HCCCC certifies it is necessary to prevent a disproportionate medical risk shift.
The bill does not appear to include retirees in its other provisions that (1) require pooling with the state employee plan, (2) require the premiums be the same as the state pays, (3) permit a premium contribution by the individual covered, or (4) permit an administrative fee to be charged.
§ 4 – STATE PLAN PREMIUM ACCOUNT
The bill establishes, within the General Fund, a separate, nonlapsing account called the state plan premium account. Employer and employee premiums paid under the provisions of the bill must be deposited into this account. The account will be administered by the comptroller, in conjunction with the HCCCC, for insurance premium payments.
§ 4 – PENALTIES
The bill creates two types of penalties for employers who fail to pay or pay on time.
For all employers who do not pay by the date due, interest will be added to such payment at the prevailing rate of interest, as determined by the comptroller. The interest will be paid by the employer.
If a municipal employer fails to make premium payments, the comptroller can direct the state treasurer, or any other officer of the state that is the custodian of state grant money, allocation, or appropriation due to the municipality to withhold the payment under the authority of the bill. The money or aid will be withheld until (1) the premium or interest due and unpaid has been paid or (2) the treasurer or other state officers determine that arrangements, satisfactory to the treasurer, have been made for the payment of such premium and interest. The bill provides an exception that such money will not be withheld if withholding will impede the receipt of any federal grant or aid in connection with that money.
It does not appear that this provision applies to other nonstate public employees such as school boards or public libraries.
If a municipal-related employer, small employer or nonprofit employer fails to make premium payments, the comptroller can terminate employee participation in the state plan and request the attorney general to recover any premium and interest costs.
§ 5 – STATE EMPLOYEES' BARGAINING AGENT COALITION (SEBAC) CONSENT
The bill prohibits health coverage to any new employee groups under the bill until SEBAC provides its consent to the clerks of both houses of the General Assembly. SEBAC is the union coalition that provides coalition bargaining for unionized state employees for health insurance and retirement benefit issues. (Individual unions negotiate individually for pay increases and other conditions of work matters. )
§ 6 – REPORT TO THE GENERAL ASSEMBLY
The bill also requires the comptroller to submit a report to the General Assembly with recommendations for terms and conditions on how the state employee health plan can be further expanded to include individuals not authorized under the bill. The report is due to the legislature by January 1, 2010.
§ 7 – ADVISORY COMMITTEES
The bill establishes a Municipal Health Care Advisory Committee (MHCAC) and a Private Sector Health Care Advisory Committee (PSHCAC) to each make recommendations concerning municipal and private sector coverage, respectively, to the HCCCC created through SEBAC.
The MHCAC consists of participating municipal employers and employees and include the following members appointed by a method to be determined by the comptroller:
1. three municipal employer representatives;
2. three municipal employee representatives;
3. three board of education employers;
4. three board of education employee representatives; and
5. one neutral chairperson, who must be a member of the National Academy of Arbitrators or an arbitrator authorized by the American Arbitration Association or the Federal Mediation and Conciliation Service to serve as a neutral arbitrator in labor relations cases.
For each of the employer and employee categories (1-4 above), one representative must be from a town with a population of 100,000 or more, one from a town with a population of least 50,000 but under 100,000, and one from a town with a population of under 50,000.
PSHCAC consists of the following members appointed by a method to be determined by the comptroller:
1. five private sector employer representatives;
2. five private sector employee representatives; and
3. one neutral chairperson, who shall be a member of the National Academy of Arbitrators or an arbitrator authorized by the American Arbitration Association or the Federal Mediation and Conciliation Service to serve as a neutral arbitrator in labor relations cases.
Employee Retirement Income Security Act of 1974 (ERISA)
ERISA is a federal law that sets standards of protection for individuals in most voluntarily established, private-sector retirement plans. ERISA requires plans to provide participants with plan information, including important facts about plan features and funding; sets minimum standards for participation, vesting, benefit accrual, and funding; provides fiduciary responsibilities for those who manage and control plan assets; and, if a defined benefit plan is terminated, guarantees payment of certain benefits through a federally chartered Pension Benefit Guaranty Corporation.
Labor and Public Employees Committee
Joint Favorable Substitute Change of Reference
Joint Favorable Substitute