October 18, 2011
SMALL EMPLOYER GROUPING FOR HEALTH INSURANCE COVERAGE
By: Janet L. Kaminski Leduc, Senior Legislative Attorney
You asked if Connecticut law permits small employers to group together solely to secure health insurance coverage. If yes, you want a legislative history of the law allowing this grouping.
Under a 1993 Connecticut law, small employers may group together solely to secure group health insurance coverage (CGS § 38a-560, Public Act 93-69). Based on the legislative history of the act, the purpose of the law was to provide small employers the economies of scale that large employers enjoy. Both chambers passed the bill unanimously.
For information on small employers and related health insurance laws, see OLR Report 2011-R-0362.
LEGISLATIVE HISTORY OF PA 93-69
PA 93-69, An Act Concerning Fictitious Grouping, originated as Senate Bill (SB) 38, which the Insurance and Real Estate Committee raised on February 2, 1993.
The committee held a public hearing on SB 38 on March 9, 1993. All the people who testified supported the bill. Former Insurance Commissioner Robert Googins speculated that the bill's “sponsors were trying to enhance pooling with respect to health insurance,” but noted that such pooling was not prohibited under existing law (Hearing Transcript, p. 97).
Senator Crisco told the committee “While I realize there has been some uncertainty as far as whether this is needed or not, based from an economic development perspective I believe this is one small part of the equation that may help us in our quest to bring Connecticut to a position of being competitive throughout the country” (Hearing Transcript, p. 117).
Jan Spegele, from the Connecticut Business and Industry Association (CBIA), said the bill would “codify the ability of small employers to form health insurance purchasing pools and through these pools . . . small employers could use their collective buying powers to achieve the economy's of scale now available only to large employers” (Hearing Transcript, p. 170).
The Insurance Association of Connecticut (IAC) and Blue Cross Blue Shield of Connecticut (BCBS) also submitted testimony supporting SB 38. However, BCBS expressed a preference for allowing the insurance commissioner to adopt regulations establishing standards encouraging and promoting such pooling arrangements (Hearing Transcript, p. 186).
The Senate debated the bill on April 21, 1993. Senator Williams explained the bill, saying it “would allow small employers . . . to group together solely for the purpose of purchasing health insurance . . . [and] take advantage of the economies of scale of a larger pool in bargaining for more favorable health insurance rates” (Senate Transcript, p. 1380-1381). No one else spoke on the bill.
The Senate passed the bill on the Consent Calendar (36-0).
The House took up SB 38 on April 28, 1993. Representative Eberle said it's purpose was to allow small employers to join together to purchase health insurance, thereby achieving the same economies of scale as large employers and savings in their health insurance bills (House Transcript, p. 2918-2921).
Representative Prelli opposed the bill, expressing concern that it could cause insurance rates to increase (House Transcript, p. 2922).
Supporting the bill, but asking questions for the purposes of legislative intent, Representative Metsopoulos asked how small employers would go about pooling together. Eberle responded that “they would say, we are a group of small employers … and we would like to have a quote from your insurance company … [p]lease make some proposals to us on the different types of plans that you have and what they would cost and we, as a group, will choose what we like” (House Transcript, p. 2926).
Representative Gilligan spoke in support of the bill, saying that it conformed law to practice. “We are simply clarifying and validating that this is a normal and sanctioned business activity” (House Transcript, p. 2929).
Representative Belden asked if small employers would have to form a legal group to purchase insurance together. Gilligan responded that they would not have to do so (House Transcript, p. 2933-2934).
Metsopoulos noted that the bill “is just going to bring a little stability and a little relief to some of the smaller businesses. CBIA is on board. The IAC is on board, small employers are on board, and the Insurance Department is on board” (House Transcript, p. 2940).
Representatives Courtney, Stillman, Winkler, Miller, Simmons, and Ward also spoke in support of the bill.
The House passed the bill unanimously (148-0).