Labor and Public Employees Committee

JOINT FAVORABLE REPORT

Bill No.:

HB-5536

Title:

AN ACT ESTABLISHING THE CONNECTICUT HEALTHCARE PARTNERSHIP.

Vote Date:

3/13/2008

Vote Action:

Joint Favorable Substitute Change of Reference to Appropriations

PH Date:

3/7/2008

File No.:

SPONSORS OF BILL:

Rep. Christopher Donovan, 84th District

REASONS FOR BILL:

To open the state employee insurance pool to municipal employees in order to reduce costs to municipalities and increase benefits to said employees.

Substitute Language:

The substitute language makes technical corrections to the underlying bill.

RESPONSE FROM ADMINISTRATION/AGENCY:

Rep. James A. Amann, 118th District, Speaker of the House of Representatives

Within the past few years, we have brought in numerous health care professionals, business leaders, and health care advocates to open the discussion on how we can improve health care services in the state and also how to reduce the costs of such services. Throughout our process of finding affordable and accessible healthcare for the residents of Connecticut, we have come to realize that there is no silver bullet that will simply cure all of our ills in this field. We know that it takes creative and sensible methods to put different pieces in place that will form a comprehensive system. The idea of pooling could be just another piece of our overall comprehensive healthcare plan.

I feel that steps have been taken within this bill to ensure that it is consumer friendly such as: allowing provisions for voluntary sign up, the formation of a cost containment committee, the availability of staff from the Office of the Health Care Advocate available to advise employees and employers on the benefits of the plan, and to assure that it will work for them.

The Majority Leader, Rep. Donovan, has been traveling the state with this plan and has explained it to numerous municipalities, with a very positive response. I think his experiences are a great first indicator of how successful this plan can be. I applaud the Majority Leader, his staff, my colleagues, and my caucus for the time and effort that they have put into this bill. I assume that in time, the entire state will be joining me in applauding them as well.

Rep. Christopher Donovan, 84th District, House Majority Leader

I believe this bill is an important piece of legislation that will provide good health care that costs less. It will stimulate our economy and provide tax relief to our municipalities by streamlining our healthcare system. This bill would allow us to open the state employee health plan and offer it to municipalities, non-profits, and small businesses on a completely voluntary basis.

This year, the state expects a $50 million savings as a result of the projected 0% increase in the state employee plan. Since this plan has been so successful, we should offer the opportunity to towns, non-profits, and small businesses.

In an effort to see if this plan would work, I began a tour several months ago, meeting with municipal officials and union leaders around the state to talk about the proposal. My goal has been to prove that both labor and management can benefit, because this plan will be able to provide good benefits for employees and save money at the same time. As the tour around the state progressed, I have been able to provide estimated costs savings to many municipalities through a detailed system of analysis. Since a large part of our economy and a large part of out uninsured population lies in the small business community, I teamed up with the Secretary of the State to see if it would work for them as well.

Another group interested to join this plan was non-profit organizations. Since many of these groups receive significant state funding and provide essential services to our communities, allowing them an opportunity to take advantage of the state plan is a benefit to the state as a whole.

Susan Bysiewicz, Secretary of the State

I strongly support this bill because it will provide a cost savings to municipalities and businesses alike. As you know, my office serves as the state's chief business registrar. Throughout my tenure, I have worked to assist and enhance our state's small and minority owned businesses, recognizing the fact that for the past 10 years, 96% of new job growth in Connecticut has been created by businesses of 50 or fewer employees.

Majority Leader Donovan has been a champion of affordable health care coverage, and I commend his leadership in developing the partnership bill.

While we know that most small business owners want access to affordable health insurance, we also know that employers are frequently forced to drop coverage for employees, shift costs to workers through higher health care contributions and deductibles, and cutback on raises and new hires due to spiraling costs. The Health Insurance Policy Council in its 2007 report “A Framework for Health Care Reform for Connecticut” cites that 52% of uninsured workers and dependents are in firms with less than 50 employees.

Nationally, and in Connecticut, elected officials and others continue to explore long-term solutions to repair a broken health care system and to provide universal, affordable care to our families, children, seniors, and other in need.

The Universal Health Care Foundation of Connecticut released a survey in 2006 entitled “Small Business Health Care Network Survey” found that 95% of Connecticut small business leaders believe that providing health care coverage is an important issue and more than half (52%) named it as among their top business challenges.

Robert Genuario, Secretary, Office of Policy and Management

While the administration appreciates and clearly supports initiatives aimed at controlling the growing employee health care costs being experienced by our cities and towns and to provide greater access to affordable quality health care to those that do not have it, it is our belief that opening up the state employee health insurance plan to municipal employees and others, including employees of small employers, is the wrong approach.

To start, there are numerous questions in regard to how municipal, “municipal-related”, non-profit, and small employers or employees would join the plan.

In regard to municipalities and school districts, they could be forced into the plan by an arbitrator, making their participation far from voluntary.

We are also unsure how the bill will affect the important oversight mechanisms provided for in Title 38a of the general statutes that seek to protect the financial integrity of health plans.

When opening up the state employee health plan to different groups of employers or to employees, the economics and the costs of the plan will change based on the changed demographics of the plan.

If the savings promised by this bill are not forthcoming for municipalities, small employers, and others joining the plan – or if the inevitable annual cost increases are deemed to be too high – I would have to believe that there would be a strong demand for the state to provide a subsidy to ensure these savings are realized or to mitigate cost increases.

Giving its own growing health care costs and the looming crisis related to the state's $21 billion OPEB liability, the state is simply not in a position to take on additional large liabilities.

Fernando Betancourt, Executive Director, Latino and Puerto Rican Affairs Commission

The Latino and Puerto Rican Affairs Commission supports this bill. 24 states across the country have already adopted similar legislation, including Massachusetts. In Connecticut, there are more than 400,000 people living without insurance. Latinos and African Americans make up a disproportionate share of those uninsured. The LPRAC support House Majority Leader Donovan and this very important piece of legislation.

Elizabeth Brown, Executive Director, Commission on Children

The Commission on Children supports this bill. It seeks to maximize the current state employee health plan system to assist municipalities, small businesses and non-profits. Efforts to address the balance between quality health care and cost containment have been sporadic and fragmented. Opening up the state employee health plan to these groups on a voluntary basis is a bold step in addressing the current health care crisis. Doing nothing is not a solution. This bill will afford viable health care options that are just not available today in the market place.

Kevin Lembo, Office of the Healthcare Advocate

Supports the bill. Expanding the State of Connecticut employee pool should increase the state's leverage in bargaining with insurers and decrease the number of uninsured in the state. It is important to note that while the goals of this bill are good, the bill needs to be examined in tandem with similar and already enacted laws involving public employees such as MEHIP. We are pleased to see the idea catching on of the pooling of risk on a large scale as a strategy to bring down health costs and to use the savings to expand healthcare coverage.

Catherine Osten, First Selectwoman, Town of Sprague

Supports the bill. Under the Majority Leader's plan, if my town's 7 municipal and 32 Board of Education employees were able to enter the state healthcare pool, those employees would have access to affordable and quality healthcare while saving our town $25,000 and the Board of Education another $131,000 a year.

James Della-Volpe, Mayor, City of Ansonia

Supports the bill. When Rep. Donovan visited Ansonia a short while ago, he was able to demonstrate that the city could not only save a considerable amount of money, but also might be able to increase benefits for employees with this voluntary program. Healthcare is a city employees' right and the cost for providing these benefits to our employees has been escalating at an alarming rate. Therefore, in an effort to mitigate or eliminate this distressing trend, I support this voluntary program.

George Sylvestre, Director of Administrative Services, Town of Stonington

Opposes the bill. My concern with the bill is that it potentially exposes the Town of Stonington, along many other municipalities with similar experiences, from the impact of fracturing the integrity of our self insured group through the collective bargaining process. The shared sense of responsibility with our employees that has been integral to our efforts over these years has come from a sense of identity and ownership of both the problems and the solutions. The potential shifting of this ownership and control may well dilute the pro-active measures currently underway. I urge you to insure that the participation by municipal employees in any state plan be allowed only by the mutual agreement of their collective bargaining units and the employer.

NATURE AND SOURCES OF SUPPORT:

Carl Antonucci, Connecticut Library Association

There are 194 public libraries in Connecticut, of which only 146 are able to offer health insurance to their full time employees. About half are departments of their municipality and about half are operated as private associations. The average number of staff is only 12.6. As small agencies, association libraries find it difficult to provide cost effective health care coverage for their employees. By opening the state plan to libraries, they would be able to provide their employees with access to a comprehensive benefit package at reasonable costs.

Thomas Morrow, Executive Director, Bristol Community Organization, Inc.

BCO is funded through state and federal grants with some private and foundation money. There has been no increase to those grants, except for a 1% COLA. Therefore, the burden of the cost increases falls on individual employees.

Jon Green, Director, Working Families

The Connecticut Healthcare Partnership is an important first step towards more comprehensive and affordable healthcare that over time can expand to become a universal system of quality care.

Lynn Coda-Klein, CSEA SEIU Local 2001

This bill is our best opportunity in 17 years to join the ranks of 24 other states that pool public service workers together in a single health plan to reduce overall costs, expand coverage, and help offset property taxes. I see this as an opportunity to offer municipalities a way to control their healthcare costs and possibly enable them to offer some tax relief to their residents.

Barry Simon, Executive Director, GILEAD Community Services, Inc.

This bill recognizes community providers as an integral part of the public/private partnership in the purchase of service community health care system. By opening the state employee plan and allowing community providers to join voluntarily, there is the possibility we will be able to reduce costs and increase benefits. The key for us is that participation will be voluntary and that there is sustained cost containment.

Andy Markowski, National Federation of Independent Business

NFIB applauds the recognition of this fact as contained in the voluntary nature of the pooling efforts in this bill and wants to ensure that this approach for small employers remains moving forward.

Daniel Livingston, SEBAC

Because of its size, and because of a skilled labor/management committee which works with the State Comptroller to purchase health insurance, it is possible for the State to provide good health benefits for a decent price by negotiating well below market rates from health insurers, and by including within its benefit mix all the preventive and chronic care initiatives which ultimately save money by keeping people healthier.

Lucy Nolan, One Connecticut

Leveraging buying power helps all the parties involved. The partnership can also be a building block toward One Connecticut's goal of achieving health care coverage for everyone by demonstrating the benefits of economies of scale and large purchasing groups.

Connecticut Nonprofit Human Services Cabinet

A substantial benefit for participation in this program is the 8% cap on increases to the state plan. While the question remains as to whether or not most nonprofits will be able to afford the state plan, it could certainly reduce the out-of-pocket costs that many nonprofit employees face on their existing plan.

National Association of Social Workers (NASW)

With a larger pool: coverage costs less, administration is more efficient and less costly, cost containment efforts can be applied and monitored, electronic records can more easily be instituted, better data can be collected so that best practices can be determined, and it is easier for doctors and other health care providers to apply for reimbursement.

John Harrity, GrowJobsCT

Opening the state employees' insurance plan to private employers would allow them to save substantially. I am told that the state coverage options represent a 15-20% savings over purchasing similar plans outside the pool. That's a huge savings that can help make Connecticut businesses more competitive and help ensure that Connecticut manufacturing workers continue to have decent health care.

Bart Russell, Connecticut Council of Small Towns (COST)

The skyrocketing costs for local employee and retiree health insurance represent one of the most serious fiscal challenges facing small towns. Double digit increases in health insurance costs have begun to dominate budget growth in many communities resulting in fewer resources available for other critical services, including education. We are pleased that this bill takes a voluntary approach, which allows towns to determine whether participating in the state health insurance plan can be truly effective in containing costs.

AFL-CIO

According to a January 2008 report by the Connecticut Conference of Municipalities, “many municipalities are reporting cost increases of between 10% and 20% over last year.” The projected 2008 increase for the State employee health care plan is 0%!

Brian Baker, Assistant Director, South Park Inn, Inc.

Agencies like ours have struggled to make ends meet and continue to do more with fewer resources. We have been virtually flat funded by the Department of Social Services for the last twenty years with an average cost of living increase of 1.4% off set by a staggering increase in fuel, food, and insurance costs. We are forced to try to provide the best health care coverage for our employees at the best cost for our agency. This is worsened by the fact that our agency can not pay the comparable wages of many other similar public and private employers.

If we have the opportunity to participate in the State Employee Health Plan our agency would save 25% of premium costs and we would be able to affordably buy into the plan. We would not be facing the premium increase of 15.38% of 2007 and we would not be passing on the costs to our employees.

Jim Horan, Connecticut Association of Human Services (CAHS)

Our 15 employee nonprofit organization demonstrates that the current health care system is broken. In 2007, CAHS joined MEHIP because it offered a slightly reduced rate. But for 2008, we were shocked to receive a premium increase of 76% to maintain the same benefits. There was no way our small organization could absorb such an extraordinary rate hike. We worked with our broker to purchase a new health insurance package that increased co-pays and increased the in-patient and out-patient hospital deductible from $100 to $1,500, and we still were hit with a 28% increase. With rising costs that are not matched with rising incomes, our organization cannot sustain double digit increases year after year.

Connecticut Conference of Municipalities (CCM)

The high cost of providing health care to municipal officials is hurting towns and cities across the state. Over the past two years, several legislative proposals have been made that would have the state address this issue in varying ways. CCM informed an Ad Hoc committee on Municipal Health Care Costs to discuss the present cost-related problems, and to generate ideas for assisting municipalities in coping with them. The committee's report discusses the problems municipalities face in finding affordable health insurance, steps they have taken to address those costs, and makes recommendations for state action. One important aspect of those recommendations is to provide local governments with options of which they can voluntarily avail themselves, including through state programs.

Terry Edelstein, Community Providers Association

It has been suggested that the ability to buy into the state health plan may reduce the need for increased COLAs for community providers. We ask that as this bill is considered, a mechanism to fund the cost of this health insurance for private providers as part of the package of reimbursement they receive from the state be discussed as well.

Community Health Center Association of Connecticut

This bill would help not only to cut health care costs for health center administrators, but offer an attractive insurance package for new staff, thereby improving recruitment and retention efforts. This is a smart bill which dovetails nicely with the state's efforts to achieve health care coverage for more residents. Health center savings from lower health care premiums could be used to care for the uninsured.

AFSCME Council 15

Paul Rapanault, Uniformed Professional Fire Fighters Association of Connecticut

Sharon Hagans, CSEA SEIU Local 2001

David Radcliffe, Meriden, CT

George Cody, Registrars of Voters Association of Connecticut (ROVAC)

Connecticut Education Association (CEA)

Phyillis Bolden, Member, Norwalk City Council

Luis Cotto, Member, Hartford City Council

Ron Cretaro, Connecticut Association of Nonprofits

Erika Romero, MSW student, UCONN

Connecticut Nurses Association (CNA)

Paul Mahler, MSW, UCONN

Connecticut Association of Foster and Adoptive Parents, Inc.

Ron McLellan, President, SEIU Local 511

Stan Soby, Vice President, Oak Hill

Diana Naimo, Meriden, CT

James Tedford, Vernon, CT

Sharon Palmer, President, AFT Connecticut

Jen Ramirez, MSW student, UCONN

Phil Sherwood, Connecticut Citizen Action Group (CCAG)

David Dal Zin, MSW student, UCONN

NATURE AND SOURCES OF OPPOSITION:

Laurence Cass, Jr., Weston, CT

I am against this bill because the proposed plan requires a three year lock-in for participation, would increase the tax burden for cities and towns, would permit the Comptroller to cherry pick or delay certain groups from entering into the plan, thus creating market instability and increasing rates; and large scale pools have historically saved little on administration costs. Typically 80% of the costs of a plan come directly from claims. That is where potential savings need to come from.

Brien Beakey, President, HealthConsultants Group, LLC.

I would like to address three issues with the underlying bill. Those three issues are Costs, Administration Concerns, and Recommendations for making insurance more affordable for small employers and non-profits.

Making the Connecticut state employees' health plan available to municipalities, small employers, and non-profits will not help the health insurance problems, it will only add to them. The Connecticut state employees' health plan is more expensive than a similar small group health plan that is available to small employers and non-profits.

To administer this plan, the state comptroller will be required to hire additional staff. We believe that this bill will require additional staff to review and complete an underwriting process and potentially prevent and reject a small employer and non-profit from entering the plan. Based on requiring additional staff of 35 employees, with salary, health benefits, and general expenses of about $60,000, the cost would be over $2,000,000 per year.

Claims are also a big issue. According to studies conducted by such organizations as National Association of Health Underwriters (NAHU) and the Connecticut Health Insurance Policy Council, they report that 86% of the costs in a health plan are the claims and 14% of the costs is administration. Over 70% of the claims that occur inside a health plan are lifestyle choices. Ability to give participants better insurance rates and incentives for good lifestyle choices is just one way to really reduce premiums.

Eric George, Connecticut Business and Industry Association (CBIA)

If municipal employees are covered under a collective bargaining agreement, then an arbitrator – not the local government – could decide whether they should join the state employee health plan. Thus the “voluntary” program would actually become mandatory in those situations. This is troubling since the state has not done a particularly good job in containing its own health care costs – such as the $21.7 billion unfunded liability for state retiree health care costs and the fact that one state employee health plan for a family of four costs more than $21,000 a year. Forcing these municipalities into the state employee plan would increase their health care costs, which would negatively affect their property taxes. That's a concern to the business community because taxpayers would then have to shoulder a heavier property tax burden.

Connecticut Association of Boards of Education, Inc. (CABE)

This bill as currently structured does not constitute a “healthcare partnership” as the title implies. It rather would result over a predictably short time in a takeover of municipal healthcare management by the state Comptroller's office while the communities would be forced to pay the bill, whatever it might be. Towns and cities, other quasi-government agencies, and many independent businesses providing support services would lose control of a critical component of employee total compensation through collective bargaining and compulsory binding arbitration.

Maurice Andrien, Vice President, Hub International

Tanya Court, Director of Public Policy, Business Council of Fairfield County

Reported by: Stephen A. Palmer

Date: 3/14/08