OFFICE OF FISCAL ANALYSIS

Legislative Office Building, Room 5200

Hartford, CT 06106 (860) 240-0200

http: //www. cga. ct. gov/ofa

sHB-5536

AN ACT ESTABLISHING THE CONNECTICUT HEALTHCARE PARTNERSHIP.

As Amended by House "A" (LCO 4748), House "B" (LCO 4801)

House Calendar No. : 288

OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 09 $

FY 10 $

State Comptroller

GF - Cost

500,000

520,000

State Comptroller – state employee and retiree health insurance accounts

Various - See Below

See Below

See Below

Department of Revenue Services

GF - See Below

See Below

See Below

Note: GF=General Fund

Municipal Impact:

Municipalities

Effect

FY 09 $

FY 10 $

Various Municipalities

Savings

Potential

Potential

Explanation

The bill provides an additional health insurance option to municipalities, small employers and non profits by permitting the comptroller to offer coverage under the state employee health plan to their employees. The bill requires that the total premium the municipal employers pay be the same as those the state pays for the same insurance plans. It specifies that municipal employers may require an employee contribution toward the premium, subject to any collective bargaining agreement. It also permits the comptroller to charge participating employers an administrative fee on a per member per month basis. The bill specifies that the comptroller is not required to offer coverage from each vendor now participating in the state plan.

Funding in the amount of $500,000 and two positions are appropriated to the Comptroller's office to administer the Connecticut Healthcare Partnership in sHB 5021, the Appropriations Act, as favorably reported by the Appropriations Committee. The two positions funded for year are: 1. Benefit Coordinator $56,000 ($75,000, annually) and 2. Benefit Officer $42,000 ($56,000, annually). They will coordinate the actuarial reviews of applications, monitor claims data from the insurers, and manage plan coordination and implementation issues. $40,000 is provided for a neutral Healthcare Cost Containment Committee chair. The balance of the funding, $362,000, is for actuarial consultants necessary to evaluate the risk of groups applying to the plan.

Permitting additional participants to join the existing state employee health plan could potentially impact the existing pool. The bill addresses a potential negative impact to the state employee pool by preventing an employer from shifting a significantly disproportional part of its medical risks to the state employee plan. The cost of the state employee health plans is based upon the demographics and claims experience of the existing composition of state employees and retirees. To the extent that additional covered lives impact the loss ratio of the plans, a resulting impact may be experienced on the plans costs to the state. While at least 20 other states allow municipalities to participate in their state employee health plans, 11 of these states require non-state employees to be in a separate rating pool.

Current law exempts new or renewal contracts or policies written to provide health care coverage to municipal employees under a plan procured pursuant to Connecticut General Statute 5-259(i) from the Insurance Premiums Tax. To the degree that this bill results in an increase in the number of municipalities procuring coverage under Connecticut General Statute 5-259(i) then the state would experience a revenue loss to the Insurance Premiums Tax.

There are approximately, 110,000 municipal employees (including boards of education). Municipal participation in the state plan is voluntary but does require a minimum of three years participation. It is anticipated that certain municipalities will achieve savings from the state's large-group purchasing power, pooled risk and administrative economies of scale. In order for a municipality to determine if it can achieve a savings under the state plan, it must examine not only the rates and plan design but also 2 to 3 years of its utilization data.

House “A” replaced the original bill and has the fiscal impact described above.

House “B” modifies the criteria for representatives of the Non-state Public Health Care Advisory Committee and has no fiscal impact.

Background

State Employee Health Plan

The benefits provided under the state employee health plans are established in a collectively bargained agreement between the State of Connecticut and the State Employees Bargaining Agent Coalition (SEBAC). The current 20-year agreement expires in 2017.

Currently, the state plan is provided on a fully insured basis through 4 vendors (Anthem Blue Cross and Blue Shield, Health Net, Oxford/United Health and Pharmacare ) offering 12 plans for active and retired employees. It covers approximately 55,000 employees, 37,000 retirees and their dependents.

The FY 08 premiums rates for the state employee plans are published as an attachment to the Comptroller's Numbered Memorandum 2007-10 and can be found using the following link: http: //www. osc. state. ct. us/2007memos/attachments/att200710. asp

As a result of the recent negotiation with the state's health care vendors, it is anticipated that the state employee health plan premiums for FY 09 will not contain an increase. The finalized FY 09 premium rates will be published in a Comptroller's Numbered Memorandum expected before the end of April.

The recent (3/20/08) Memorandum of Understanding between the state and SEBAC provides that beginning in FY 09, pharmacy benefits provided to state employees are to be funded on a self-insured basis. The savings associated with this change is estimated to be $14. 5 million. Per the agreement, this savings will be deposited in the state's Other Post Employment Benefits (OPEB) trust fund which was established to begin to address the state's unfunded retiree health liability estimated at $21. 7 billion.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.