OLR Bill Analysis

sHB 5536 (as amended by House “A, B”)*

AN ACT ESTABLISHING THE CONNECTICUT HEALTHCARE PARTNERSHIP.

SUMMARY:

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 or all of their retirees. When an employer applies to cover some employees or some retirees, she must deny coverage if the Health Care Cost Containment Committee (HCCCC) certifies to her that the application would shift a significantly disproportionate part of the employer's medical risks to the state plan.

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 employers 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, 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 comptroller must develop procedures for employers to withdraw from coverage and for employers with public employee collective bargaining, the procedures must comply with state collective bargaining law.

The bill specifies that it allows the comptroller to procure coverage for nonstate employees from insurance vendors other than those providing coverage for state employees. It is unclear whether this provision conflicts with the requirement to pool all the new employees and retirees in the state employee plan. The bill also specifies 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 Nonstate Public 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.

The bill permits two or more municipalities to join together as a single entity to obtain health insurance for their employees. It requires the group to be fully insured and meet existing health insurance requirements.

*House Amendment “A” replaces the original bill. It (1) requires the comptroller to create an application for employers seeking coverage from the state plan, (2) requires the comptroller to develop procedures for employers to withdraw from the coverage, (3) changes the bill's effective dates, (4) allows coverage for nonstate employees by vendors who do not provide state employee coverage, (5) makes initial participation in the plan a permissive subject of collective bargaining and exiting the plan a mandatory subject of bargaining, and (6) permits two or more municipalities to join together as a single entity to obtain employee health insurance.

*House Amendment “B” changes the population size ranges of the representatives appointed to the Nonstate Public Health Care Advisory Committee.

EFFECTIVE DATE: September 1, 2008, except the definitions, the provision creating the advisory committees, and the SEBAC approval are effective upon passage; and the report and the authority for two or more municipalities to join together to purchase health insurance are effective January 1, 2009.

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 in connection with a nonstate public employer 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. 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. 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.

The bill provides an exception to the small employer 50 employee rule for employers who are either municipal-related employers or nonprofits.

It also specifies state plan enrollees must not include those 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 (e. g. , Taft-Hartley Act).

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 their application for coverage is approved according to the bill's provisions. A board of education and a municipality must be considered separate employers for purposes of the bill.

The bill specifies that it allows the comptroller to procure coverage for nonstate employees from insurance vendors other than those providing coverage for state employees. It is unclear whether this provision conflicts with the requirement to pool all the new employees and retirees in the state employee plan. The bill also specifies the comptroller is not required to offer coverage from each vendor now participating in the state plan.

It requires the comptroller to create an application for employers seeking coverage from the state plan. The application must require an employer to disclose whether it will offer any other health plan to the employees who are offered the state plan.

The bill establishes two different processes for coverage to begin, depending on whether the application covers all or some of the employees. These rules apply to all nonstate employees and retirees.

If the application covers all of an employer's employees, the comptroller must begin coverage no later than the first day of the third calendar month following such application. This means if an application arrives anytime in January, the coverage must start April 1.

If the application covers some of an employer's employees or it indicates the employer will offer other health plans to employees who are offered the state health plan, the comptroller must forward the application to the HCCCC for review. Under the bill, the comptroller must deny coverage if the HCCCC certifies to her that the application is shifting a significantly disproportional part of the employer's medical risks to the state plan. Coverage must begin no later than the first day of the third calendar month after the application as long as the HCCCC has not informed the comptroller that the employees proposed for coverage constitute a disproportionate shift of the employer's medical risks to the state plan.

The comptroller must forward the application to the HCCC within five business days and the HCCC may, not later than 30 days after receiving the application, certify to the comptroller whether risk shifting is taking place.

Permissive and Mandatory Collective Bargaining

The bill makes the initial participation in the state employee plan a permissive subject of collective bargaining, despite any existing collective bargaining laws to the contrary. The decision to join the plan is subject to binding arbitration only if the union and the employer mutually agree to bargain over the initial participation. The mutual agreement must be in writing and signed by authorized representatives of the union and the employer.

Continuation in the state plan, after initial participation, is a mandatory subject of bargaining, and is subject to binding interest arbitration in accordance with the same procedures and standards that apply to any other mandatory subject of bargaining under state, municipal, and certified board of education employees collective bargaining law.

Private Sector and Federal Law

The private sector employers covered under the bill (i. e. , small businesses, nonprofits, and municipal-related employers) 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). If the comptroller later determines the state plan complies with ERISA, she must resume granting applications. ERISA is a federal law that sets standards, including fiduciary responsibilities, for most voluntary private sector retirement plans and employer-sponsored health plans (see BACKGROUND).

Exception to the HCCCC Review Requirement

Under the bill, the comptroller must forward an employer's application for HCCCC review when the application does not cover all the employer's employees. This requirement is waived when the only employees not covered are temporary, part-time or durational employees.

The bill also permits HCCCC review to be omitted in cases where individual employees decline coverage from their employer for themselves or their dependents. This language appears unnecessary and has no practical affect because at the point in time when the application is being considered by the comptroller, there is not yet any coverage offered to employees for the employees to turn down.

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 month, each employer must pay the comptroller an amount she determines for the coverage.

For all employers, the bill permits them to require covered employees to contribute a portion of the cost of the employees' 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, 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;

2. gender;

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 third 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 must deny coverage.

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.

The bill states that it does not diminish any retiree's right to health insurance under the union contract or any provision of state law.

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 is 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 employer must pay the interest.

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 is 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 must not be withheld if withholding impedes 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 Nonstate Public Health Care Advisory Committee (NPHCAC) and a Private Sector Health Care Advisory Committee (PSHCAC), each of which must make recommendations concerning municipal and private sector coverage, respectively, to the HCCCC created through SEBAC.

NPHCAC

The NPHCAC 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 20,000 but under 100,000, and one from a town with a population under 20,000.

PSHCAC

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.

JOINT MUNICIPAL HEALTH INSURANCE PURCHASES

The bill permits two or more municipalities to join together as a single entity, by written agreement, to obtain health insurance for their employees. It requires the group to be fully insured and meet existing health insurance requirements.

The agreement must establish membership for the group, the duration of the health coverage, requirements regarding premium payments for health coverage, and the procedures for a municipality to withdraw from such a group and terminate coverage.

BACKGROUND

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.

COMMITTEE ACTION

Labor and Public Employees Committee

Joint Favorable Substitute Change of Reference

Yea

7

Nay

1

(03/13/2008)

Appropriations Committee

Joint Favorable Substitute

Yea

39

Nay

14

(03/28/2008)

Insurance and Real Estate Committee

Joint Favorable

Yea

11

Nay

6

(04/16/2008)

Planning and Development Committee

Joint Favorable

Yea

11

Nay

5

(04/18/2008)