PA 09-147—sHB 6582 (VETOED)
Insurance and Real Estate Committee
Planning and Development Committee
Public Health Committee
AN ACT ESTABLISHING THE CONNECTICUT HEALTHCARE PARTNERSHIP
SUMMARY: This act requires the comptroller to convert the state employee health insurance plan, excluding dental, to a self-insured arrangement for benefit periods beginning July 1, 2009 and later. (Pharmacy benefits are already self-insured. ) It authorizes her to (1) merge, on or after January 1, 2010, any health benefit plans she arranges into the self-insured state plan and (2) contract with companies to provide administrative services for the self-insured state plan. It requires any such third-party administrator to charge the state its lowest available rate.
The act requires the comptroller to offer employee and retiree coverage under the self-insured state plan to (1) nonstate public employers beginning January 1, 2010; (2) municipal-related and nonprofit employers beginning July 1, 2010; and (3) small employers beginning January 1, 2011. She must do this (1) after the General Assembly receives written consent from the State Employees' Bargaining Agent Coalition (SEBAC) and (2) subject to specified requirements and conditions. Employers that apply and are approved for coverage must agree to benefit periods of at least two years. The act authorizes the comptroller to adopt regulations related to opening the state plan to these other groups.
The act requires a health care actuary to (1) review certain employer applications for coverage under the state plan and (2) certify to the comptroller in writing if the group will shift a significantly disproportionate share of its employees' medical risks to the state plan. If so, the comptroller must decline the group coverage.
1. requires the state to charge employers participating in the state plan the same premium rates the state pays, except it may adjust the rate for a small employer to reflect its group characteristics;
2. allows the comptroller to have state money withheld from a municipality or other state political subdivision participating in the state plan that fails to pay premiums and, with 10-days' notice, terminate any participating employer group that does not pay its premiums;
3. establishes a “state plan premium account” as a restricted grant fund, into which employer groups' premiums must be deposited and from which claims must be paid;
4. establishes two advisory committees to make recommendations to the Health Care Costs Containment Committee (HCCCC), a state labor and management committee that exists under agreement with SEBAC, about coverage for nonstate public and private-sector employees;
5. permits two or more municipalities to enter into a written agreement to act as a single entity to obtain health insurance for their employees, subject to specified conditions, including insurance commissioner approval; and
6. excludes from the state insurance law definition of “small employer” a municipality obtaining health care benefits through the self-insured state plan.
The act eliminates the dependent age limitation for certain children eligible for coverage under the state plan or a state-arranged plan. (State insurance law requires coverage for an unmarried child under a group insurance policy to continue until age 26. )
The act also makes conforming and technical changes.
EFFECTIVE DATE: July 1, 2009, except for the provisions about (1) self-insuring the state plan, (2) needing SEBAC's agreement before opening the state plan to other groups, (3) municipalities acting as a single entity to obtain employee health insurance, and (4) covering dependents to age 26 under the state plan, which are effective upon passage.
§ 1 — CONVERT STATE PLAN TO SELF-INSURANCE
By law, the comptroller solicits bids and enters into contracts with insurance carriers to provide health insurance for state employees and retirees. The act requires the comptroller to begin the process of converting the state employee health insurance plans, including pharmacy benefits but excluding dental benefits, to a self-insured arrangement for benefit periods beginning July 1, 2009 and later. (The state began self-insuring pharmacy benefits July 1, 2008. )
Insurer Administering Self-Insured State Plan
The act permits any licensed insurer in Connecticut to conduct business with the state with respect to the self-insured plan. Under the act, the state's contract with an insurer for administrative services must require the insurer to charge the state its lowest rate available.
Merging State-Arranged Plans
The act permits the comptroller to merge, on or after January 1, 2010, any benefit plans she arranges into the self-insured state plan.
Under authority granted by law, she arranges hospital, medical, and surgical insurance for a person who (1) adopts a child from the state foster care system, (2) has been a foster parent for the Department of Children and Families for at least six months, or (3) is a parent in a permanent family residence for at least six months. The law permits her to provide these people coverage through the state employee insurance plan.
The law also authorizes her to arrange coverage under the Municipal Employee Health Insurance Plan (MEHIP), on a fully-insured or risk-pooled (e. g. , self-insured) basis, for (1) employees of municipalities, nonprofit corporations, community action agencies, and small employers; (2) people eligible for a health coverage tax credit under federal law; (3) members of an association of personal care assistants; and (4) people eligible for a retirement benefit from the Connecticut municipal employees' retirement system. The comptroller currently offers a fully-insured MEHIP plan for these groups and a self-insured “enhanced MEHIP” plan for municipalities.
§ 1 — COVERAGE FOR CERTAIN DEPENDENT CHILDREN
The act eliminates the dependent age limitation for a child who is (1) eligible for coverage under the state plan or a state-arranged plan and (1) a child of (a) a state or local police officer, firefighter, or constable with criminal law enforcement duties who dies from injuries received on the job or (b) an adoptive or foster parent or a parent in a permanent family residence for at least six months. Prior law ended dependent coverage at age 18 or, for a child of an adoptive or foster parent or parent in a permanent family residence who has not finished college, age 21. (State insurance law requires coverage for an unmarried child under a group insurance policy to continue until age 26. )
§§ 2 & 3 — OPENING STATE EMPLOYEE PLAN TO OTHERS
The act requires the comptroller to offer coverage under the self-insured state employee plan to certain employer groups, but specifies that the comptroller does not have to offer coverage from every plan offered under the state plan to every employer.
The act requires the comptroller to offer participation in the state plan, in intervals of at least two years, to the following groups:
1. nonstate public employers beginning January 1, 2010;
2. municipal-related and nonprofit employers beginning July 1, 2010; and
3. small employers beginning January 1, 2011.
She must offer coverage to a group if the group submits an application that is approved as the act provides.
The act defines “nonstate public employer” as a municipality or other state political subdivision, including a board of education, quasi-public agency, or public library. A “nonstate public employee” is an employee or elected officer of a nonstate public employer.
A “municipal-related employer” is a property management, food service, or school transportation business that contracts with a nonstate public employer.
A “nonprofit employer” is (1) a nonprofit corporation organized under federal law (26 USC § 501) that contracts with the state or receives a portion of its funding from a local, state, or federal government or (2) a tax-exempt organization under federal law (26 USC § 501(c)(5)).
A “small employer” is a person, firm, corporation, limited liability company, partnership, or association actively engaged in business or self-employed for at least three consecutive months that, on at least 50% of its working days during the preceding 12 months, employed 50 or fewer employees most of whom are in Connecticut. When counting the number of employees, companies that are affiliates under state law or eligible to file a combined tax return are considered one employer. The act specifies that a nonstate public employer is not a small employer.
Under the act, initial open enrollment for nonstate public employers must be for coverage that begins January 1, 2010. After that initial open enrollment for nonstate public employers, subsequent enrollment periods must begin July 1. Open enrollment for municipal-related, nonprofit, and small employers must be for periods beginning January 1 and July 1.
Coverage Term, Renewal, and Withdrawal
In order for an employer group to participate in the self-insured state employee plan, the group must agree to benefit periods of at least two years. An employer may apply for renewal before the end of each benefit period.
The act requires the comptroller to develop procedures for an employer group to (1) apply for initial plan participation and subsequent renewal and (2) withdraw from plan participation. The procedures must include the terms and conditions under which a group can withdraw before the benefit period ends and how to obtain a refund for any unearned premiums paid. The procedures must provide that nonstate public employees covered under a collective bargaining agreement must withdraw in accordance with any applicable state collective bargaining laws for municipal employees and teachers.
The act requires the comptroller to create an application for employer groups seeking coverage under the state plan. In the application, the employer must disclose whether it will offer any other plan to the employees offered the state plan.
Status as a Governmental Health Plan Under Federal ERISA
The federal Employee Retirement Income Security Act (ERISA) sets certain fiduciary and disclosure standards for private-sector health plans and exempts governmental plans from these requirements. It is unclear whether opening the state plan to private-sector employers jeopardizes the plan's status as a governmental plan under ERISA.
Consequently, the act authorizes the comptroller to deny an employer admission into the state health plan if she determines that granting coverage to the employer will affect the state plan's status as a governmental plan. In addition to denying coverage to an employer if the employer will affect the ERISA exemption status, she must stop accepting applications from municipal-related employers, nonprofit, and small employers. (Presumably, municipal-related, nonprofit, and small employers that have approved applications, but for which coverage has not yet started, will be admitted to the plan. )
The act requires the comptroller to resume accepting applications from these employers if she determines that granting them coverage will not affect the plan's ERISA status. The act does not set criteria for these decisions.
The act requires the comptroller to publicly announce any decision to stop or resume accepting applications.
The act prohibits an employee from enrolling in the state plan if he or she is covered through his or her employer under a health insurance plan or arrangement issued to, or in accordance with, a trust established through collective bargaining under the federal Labor Management Relations (i. e. , “Taft-Hartley”) Act.
§ 4 — EMPLOYER GROUP PARTICIPATION
Permissive and Mandatory Collective Bargaining for Nonstate Public Employers
The act makes a nonstate public employer group's initial participation in the state employee plan a permissive subject of collective bargaining. If the union and the employer agree in writing to bargain over the initial participation, then the decision to join the plan is subject to binding arbitration. Authorized union and employer representatives must sign the agreement.
The act makes a nonstate public employer group's continuation in the state plan a mandatory subject of collective bargaining, subject to binding interest arbitration in accordance with applicable state collective bargaining laws for municipal employees and teachers.
The act specifies that a board of education and a municipality are considered separate employers and must apply for coverage separately under the state plan.
Application and Decision Process for All Eligible Employers
The act establishes two different processes for determining whether a nonstate public, municipal-related, nonprofit, or small employer group's application for coverage will be accepted, depending on whether the application covers all or some of the employees.
If the application covers all of an employer's employees, the act requires the comptroller to accept the application for the next open enrollment period and give the employer written notice of when coverage begins. But if the application covers only some of an employer's employees or it indicates the employer will offer other health plans to employees offered the state health plan, the comptroller must forward the application to a health care actuary within five days of receiving it.
Within 60 days of receiving an application from the comptroller, the actuary must determine whether it will shift a significantly disproportionate part of the employer group's medical risks to the state plan. If so, the actuary must certify this in writing to the comptroller and include the specific reasons for the decision and the information relied upon in making it.
The act requires the comptroller to consult with a health care actuary that will develop actuarial standards for assessing the shift in medical risks of an employer's employees to the state plan. The comptroller must present the standards to the HCCCC for its review and evaluation before the standards are used. (Presumably, the comptroller will contract with an actuary for these services, although the act does not specify this. )
Under the act, if the comptroller receives a disproportionate risk shift certification from the actuary, she must deny the application and give the employer written notice that includes specific reasons for denial. If the comptroller does not receive such a certification from the actuary, she must accept the application and give the employer written notice of when coverage begins.
Exceptions to Actuarial Review
The act prohibits the comptroller from forwarding to the actuary an application that proposes to cover fewer than all of its employees because (1) the employer decides not to cover temporary, part-time, or durational employees or (2) individual employees decline coverage. Presumably, therefore, the comptroller must accept the application for the next open enrollment period and give the employer written notice of when coverage begins.
Regulations Regarding Actuarial Review
The act authorizes the comptroller to adopt regulations in accordance with law to establish procedures for the actuary's application reviews and the standards used in the reviews.
Self-Insured Plan is Not Unauthorized Insurer or “MEWA”
The act specifies that the self-insured state employee plan is not an unauthorized insurer or a “multiple employer welfare arrangement” (MEWA).
§ 5 — RETIREES
Employer groups eligible to cover employees under the state plan also may seek coverage for their retirees. The act states that it does not diminish any right to retiree health insurance under a collective bargaining agreement or state law.
The act requires the employer to remit premiums for retirees' coverage to the comptroller in accordance with the act's provisions. It specifies that a retiree's premiums for coverage under the state plan must be the same as those the state pays, including premiums retired state employees pay.
Application and Decision Process
The application process and decision notice requirements with respect to covering an employer's retirees, including actuarial review if the employer's application proposes to cover fewer than all retirees, is the same as for employees (described in § 4 above).
Exceptions to Actuarial Review
The act prohibits the comptroller from forwarding an application to the actuary when the only retirees an employer excludes from the proposed coverage are those who (1) decline coverage or (2) are Medicare enrollees. Presumably, therefore, the comptroller must accept the application for the next open enrollment period and give the employer written notice of when coverage begins.
§ 6 — PREMIUMS, FEES, COST SHARING, AND STATE ACCOUNT
The act requires, with an exception for small employers, that the premiums an employer group pays to participate in the state plan must be the same as those the state pays, including any premiums state employees and retirees pay. It requires an employer to pay premiums to the comptroller monthly in an amount she determines for providing coverage for the group's employees and retirees, if any.
Small Employer Premiums
The act permits the comptroller to adjust the premiums charged a small employer to reflect one or more group characteristics specified in state insurance law. These include:
1. age, but age brackets of fewer than five years are not permitted;
3. geographic area, but one smaller than a county is not permitted;
4. industry, within certain variation limits;
5. group size, within certain variation limits;
6. administrative costs saved by participating in the state plan, as long as they are measurable and realized on items such as marketing, billing, or claims paying functions, but not commissions;
7. savings realized by not paying a profit to an insurance carrier by participating in the state plan; and
8. family composition, including employee, employee plus family, employee and spouse, employee and child, employee plus one dependent, and employee plus two or more dependents.
Administrative Fee, Fluctuating Reserves Fee, and Employee Contribution
The act authorizes the comptroller to charge employers an administrative fee calculated on a per-member, per-month basis. In addition, the comptroller is authorized to charge a fluctuating reserves fee that she deems necessary to ensure an adequate claims reserve. (The act provides no guidance on how she will determine this. )
It permits an employer to require a covered employee or retiree to pay part of the coverage cost, subject to any applicable collective bargaining agreement.
Penalties for Late Payment of Premiums
Interest. If an employer does not pay its premiums by the 10th day after the due date, the act requires the group to also pay interest, retroactive to the due date, at the prevailing rate, as the comptroller determines.
State Money Withheld. If a nonstate public employer fails to make premium payments, the act authorizes the comptroller to direct the state treasurer, or any state officer who is the custodian of state money (i. e. , grant, allocation, or appropriation) owed the group, to withhold payment. The money must be withheld until (1) the group pays the comptroller the past due premiums or interest or (2) the treasurer or state officer determines that arrangements, satisfactory to the treasurer, have been made for paying the premiums and interest.
The act prohibits the treasurer or state officer from withholding state money from the group if doing so impedes receiving any federal grant or aid in connection with it.
Terminate Plan Participation. With respect to a (1) municipal-related, nonprofit, or small employer and (2) nonstate public employer that is either not owed state money or from which money is not withheld, the act allows the comptroller to terminate the group's participation in the state plan for failure to pay premiums if she gives the group at least 10 days notice. The group can avoid termination by paying premiums and interest due in full before the termination effective date.
The act allows the comptroller to ask the attorney general to bring an action in Hartford Superior Court to recover any premiums and interest owed or seek equitable relief from a terminated group.
State Plan Premium Account
The act establishes a separate, nonlapsing State Plan Premium Account within the grants and restricted accounts fund. The comptroller, to whom employer groups remit premiums, must (1) deposit the premiums collected into this account and (2) administer the account to pay claims.
§ 7 — ADVISORY COMMITTEES
Nonstate Public Health Care Advisory Committee
The act establishes a 12-member Nonstate Public Health Care Advisory Committee, which must make recommendations to the HCCCC regarding health care coverage for nonstate public employees.
The committee must consist of nonstate public employers and employees participating in the state plan. Specifically, members must include three representatives each of (1) municipal employers, (2) municipal employees, (3) board of education employers, and (4) board of education employees. Of the three representatives in each category, one must represent a town with (1) 100,000 or more people, (2) at least 20,000 but under 100,000 people, and (3) under 20,000 people. The comptroller appoints the committee members. (The act does not indicate who serves as committee chair or how the chair is selected. )
Private Sector Health Care Advisory Committee
The act establishes a 12-member Private Sector Health Care Advisory Committee, which must make recommendations to the HCCCC regarding health care coverage for private-sector employees.
The committee must consist of municipal-related, nonprofit, and small employers and employees participating in the state plan. Specifically, members must include two representatives each of (1) municipal-related employers, (2) employees of municipal-related employers, (3) nonprofit employers, (4) employees of nonprofit employers, (5) small employers, and (6) employees of small employers. The comptroller appoints the committee members. (The act does not indicate who serves as committee chair or how the chair is selected. )
§ 8 — REGULATIONS
The act authorizes the comptroller to adopt regulations in accordance with the law to implement and administer the state employee plan and the provisions regarding opening the plan to other groups.
§ 9 — SEBAC CONSENT
The act prohibits the comptroller from opening the state employee plan to the specified employer groups until SEBAC provides the House and Senate clerks with its written consent to incorporate the act's terms into its collective bargaining agreement.
Presumably, SEBAC's written consent goes to the clerks for legislative action. By law, if the legislature does not take action within 30 days, the agreement is deemed approved (CGS § 5-278(b)).
§ 10 — JOINT MUNICIPAL HEALTH INSURANCE PURCHASES
The act permits two or more municipalities to enter into a written agreement to act as a single entity to obtain health insurance for their employees. It specifies that such a group is not a fictitious group.
The act requires the insurance commissioner to approve any such group, which must be fully insured (i. e. , not self-insured or using alternative financing methods). The municipalities' agreement must establish:
1. the group's membership,
2. the insurance coverage duration,
3. premium payment requirements,
4. procedures for a municipality to withdraw from the agreement, and
5. procedures for terminating the insurance coverage.
§ 11 — MUNICIPAL GROUP IS NOT A SMALL EMPLOYER
The act excludes a municipality obtaining health care benefits through the self-insured state plan from the state insurance law definition of “small employer. ” (Thus, state insurance laws relating to small employers would not apply to such a municipality. )
Self-Insured Health Benefit Plan
A self-insured health benefit plan is one that is not backed by an insurance policy. Rather, the plan sponsor funds and administers the benefit plan (i. e. , pays claims covered by the benefit plan from its own money, which may include money collected from plan enrollees as premiums). A plan sponsor may outsource or delegate the administration of its self-insured plan to a third-party administrator (TPA) (often an insurance company), but the TPA does not provide the employer with financial backing or assume financial risk associated with the claims. Due to federal law, state insurance benefit mandates generally do not apply to self-insured benefit plans.
State Employee Plan and SEBAC
In 1997, the state and SEBAC reached a 20-year agreement regarding state employee health insurance and retirement benefits. That agreement called for fully insured health insurance. Last year, the state and SEBAC entered into a memorandum of understanding (MOU) concerning certain health care issues. Among other things, the MOU (1) permitted the state to self-insure pharmacy benefits effective July 1, 2008 and (2) gives the state sole discretion to provide pharmacy benefits in the future on a fully insured, self-insured, or other appropriate basis. It specifies that such a decision “shall not be appealed or arbitrated in any forum by SEBAC, any constituent union or state employee” (Section 2(A), MOU dated March 20, 2008).
Permanent Family Residence
The act does not define “a parent in a permanent family residence. ” However, the child welfare statutes define “permanent family residence” as a child care facility the Department of Children and Families licenses, subject to specified criteria, to provide permanent care to handicapped children (CGS § 17a-154). The law requires parents who intend to provide permanent foster care to a handicapped child to occupy, as their principal residence, a residential one- or two-family home that either the parents or a nonstock corporation that seeks to protect handicapped children owns or leases. At least one parent, as his or her principal occupation, must provide direct and regular care to the foster children placed in the residence.
The federal Employee Retirement Income Security Act (ERISA, U. S. Code Title 29) governs certain activities of most private employers who maintain employee welfare benefit plans and preempts many state laws in this area. ERISA-covered welfare benefit plans must meet a wide range of (1) fiduciary, reporting, and disclosure requirements and (2) benefit requirements, including benefits required under the federal Consolidated Omnibus Budget Reconciliation Act (COBRA), Health Insurance Portability and Accountability Act (HIPAA), Mental Health Parity Act, Newborns' and Mothers' Health Protection Act, and Women's Health and Cancer Rights Act.
Governmental Plan. ERISA does not apply to a “governmental plan,” which it defines as “a plan established or maintained for its employees by the government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. ” If the state plan permits private-sector employers to join, it may lose its status as a governmental plan, thereby subjecting it to the full requirements of ERISA, including federal oversight.
U. S. DOL Opinion on ERISA Applicability. In 1999, the California School and Legal College Services of the Sonoma County Office of Education (the office) requested an advisory opinion from the U. S. Department of Labor (DOL) concerning the applicability of ERISA. Specifically, it asked if allowing 28 private-sector employees to participate in the California Public Employees' Retirement System (CalPERS) would adversely affect CalPERS' status as a “governmental plan” within the meaning of ERISA.
In its opinion, DOL stated that “governmental plan status is not affected by participation of a de minimis number of private sector employees. However, if a benefit arrangement is extended to cover more than a de minimis number of private sector employees, the Department may not consider it a governmental plan” under ERISA (U. S. DOL Advisory Opinion 1999-10A, July 26, 1999). DOL further noted that its opinion related solely to the application of ERISA's provisions and “is not determinative of any particular tax treatment under the Internal Revenue Code. ” It advised the office to contact the IRS to clarify tax treatment of the proposed arrangement.
Multiple Employer Welfare Arrangement (MEWA)
An employer that self-insures a health benefit plan for its employees is generally not subject to state insurance laws because of federal pre-emption under ERISA. But a multiple employer plan may not have the same exemption.
ERISA defines “multiple employer welfare arrangement” as an employee welfare benefit plan, or any other arrangement that is established or maintained for the purpose of offering or providing benefits to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries, except that it does not include a plan or arrangement established or maintained by a collective bargaining agreement, rural electrical cooperative, or rural telephone cooperative association (29 U. S. C. § 1002(40)).
Congress amended ERISA in 1983 to provide an exception to ERISA's preemption provisions for the regulation of MEWAs under state insurance laws (P. L. 97-473). As a result, if an ERISA-covered employee welfare benefit plan is a MEWA, states may apply and enforce state insurance laws with respect to it.
Joint Municipal Activities
By law, municipalities may jointly perform any function that each can perform separately under any law or special act, charter, or home rule ordinance (CGS § 7-148cc). Each participating municipality must approve a joint agreement in the same manner as it approves an ordinance or, if it does not approve ordinances, the budget. Any such agreement must establish a withdrawal process and require the body that approved it to review the agreement at least once every five years.