February 25, 2008
CONTRACTUAL OBLIGATIONS REGARDING THE OPENING OF THE STATE EMPLOYEE HEALTH INSURANCE POOL TO MUNICIPALITIES
By: John Moran, Principal Analyst
You asked what state contractual obligations would need to be modified in order to open the state employee health insurance plan to municipalities so that state and municipal employees and retirees would be pooled together.
The state has contracts with health insurance carriers and the state employees bargaining agent coalition (known as SEBAC) regarding health insurance. The contract with insurance carriers is up for renewal this year and the SEBAC contract lasts until 2017. Both of these contracts would have to be addressed in order to open the state employee plan to municipalities and municipal employees and retirees.
When the parties to an existing state union contract, such as the SEBAC contract, want to change a contract provision they may seek to reopen the contract and negotiate in order to reach an agreement on new language. The new agreement would then be submitted to the legislature for approval or denial (CGS § 5-278(f)).
Dan Livingston, the chief negotiator for SEBAC, said there is another way to change the agreement to accommodate municipalities. He said the legislature could pass a bill containing a provision indicating the bill will take effect when SEBAC notifies the state that SEBAC agrees to the bill's provisions and will incorporate them into the SEBAC agreement. This would allow the new municipal health insurance option without reopening the SEBAC contract for full-blown negotiations.
A third way to change the SEBAC contract is for the legislature to act unilaterally, without union consent. In the past this has led to SEBAC filing a grievance objecting to a change made with no negotiations.
Livingston indicated that state unions are willing to allow municipal employers and their employees and retirees into the state plan as long as the municipalities are not allowed to shift a disproportionate part of their medical risks to the state employee plan. Apparently some employers with multiple union contracts could do this by shifting some contracts to the state plan while keeping other contracts under the municipal plan. He said a provision preventing such risk shifting could be included in a bill.
By law the comptroller is authorized to contract with insurance carriers to procure health insurance policies for state employees, their dependents, and state retirees. She is also authorized to procure health insurance for municipalities, nonprofits, and other employers under the Municipal Employee Health Insurance Program (MEHIP). MEHIP, while done under the state's auspices, does not permit the municipal employees to be pooled with state employees.
The comptroller has contracts with the following three carriers to provide insurance for state employees and for MEHIP: (1) Anthem Blue Cross & Blue Shield, (2) HealthNet, and (3) United Healthcare Oxford. The current contracts expire on June 30, 2008, and the comptroller is now seeking bids for new contracts. The invitation to bid did not call for pooling state and municipal employees and retirees. Such pooling may require the comptroller to issue a new invitation to bid and that process could take a year.
The impact of merging state and municipal health pools would vary depending upon whether the state plan is pooled with (1) all MEHIP members including the nonprofits and other employer groups, (2) just MEHIP municipal employers, or (3) only municipalities that opt into the pool. In any of these scenarios, the impact on the pool depends upon what groups are added.
The insurance carrier (or carriers) would look at the claims experience of a group coming into the state plan and see whether that experience affects the state pool positively or negatively, said Karen Buffkin, counsel for the comptroller. If the claims experience is higher than that of the state pool it could push premiums higher. The impact would also depend upon the size of the group being added to the state pool.
In total the MEHIP plans cover about 8,000 municipal, non-profit, and small business employees, plus about 7,000 dependents. The state plan covers about 55,000 employees, 37,000 retirees, and their dependents.
From the municipal perspective, the decision whether to join the state plan would depend upon whether the town anticipating the move expected to save money. Buffkin said there could be situations, such as with a municipality that is self insured, where moving to the fully-insured state pool would not save the town money.