Insurance and Real Estate Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-11

Title:

AN ACT CONCERNING THE DUTIES OF THE CONNECTICUT HEALTH INSURANCE EXCHANGE.

Vote Date:

2/25/2014

Vote Action:

Joint Favorable Substitute

PH Date:

2/18/2014

File No.:

SPONSORS OF BILL:

Insurance and Real Estate Committee

REASONS FOR BILL:

This bill would require Access Health CT to directly negotiate premiums with health insurance carriers offering or seeking to offer qualified health plans through the Exchange in order to drive down costs.

Language Change: Line 169 section (24) after the word “exchange” the following was removed “and negotiates premiums with health carriers offering or seeking to offer qualified health plans through the exchange”. Under section 26 subsection (b) was added “The exchange may, on and after one year after the effective date of this section, negotiate premiums with health carriers offering or seeking to offer qualified health plans through the exchange.”

RESPONSE FROM ADMINISTRATION/AGENCY:

State of Connecticut Department of Insurance submitted testimony in opposition to SB 11.The Department doesn't think this bill is necessary because the CID(Connecticut Insurance Department) already has the authority to approve rates on individual health insurance products sold in Connecticut. “The Department performed its duties with thoroughness and diligence for the products offered through the Exchange for January 1, 2014 and approved rates at levels significantly lower than those submitted by the health insurers participating on the Exchange as well as the outside actuarial consulting firm hired by the Exchange to review rate prior to submission”. Due to the federal Affordable Care Act SB 11 would have a limited reach because of the acts requirements. There are strict federal rules in regards to single risk pool for a health insurance issuer's individual market and small group market including inside and outside the Exchange. There are other rules concerning the calculation of the index rate to be used by a health insurance issuer. “SB 11 will not provide broad general authority to the Exchange to negotiate premium rates with health insurers choosing to participate on the Exchange.” The approval and premium rate review process that is already in place has been very successful and the Department does not think a change is needed at this time.

NATURE AND SOURCES OF SUPPORT:

National Association of Social Workers submitted testimony in support of SB 11. The Affordable Care Act was supposed to make health insurance both accessible and more affordable to consumers. The best way to achieve this is through negotiating premium rates with insurers so that policies reach the general public through the Exchange, competitive pricing maximizes the purchasing power of consumers. As long as the Exchange uses its purchasing power to drive down costs then everything previously mentioned will take place. If SB 11 passes then the Exchange would offer small businesses a means to purchase insurance at more affordable rates. “As a small business we struggle to afford health insurance coverage for our employees”. The Exchange appears to be just another broker that doesn't really do much for small businesses because of the lack of negotiation from the Exchange on behalf of the consumers. In other states such as Massachusetts their Exchange operates where premiums are negotiated with insurers which results in more affordable premiums. “Asking consumers and small businesses to wait until some future point in time for negotiated rates fails to meet the current needs of the health insurance purchasers”. The Exchange is “our best vehicle” we wish to make insurance premiums more affordable.

Sheldon Toubman Attorney with New Haven Legal Assistance Association testimony states the whole idea behind the ACA (Affordable Care Act) was to allow individuals to bargain to drive down insurance costs. Small employers pay 18% more than large companies because of their inability to negotiate and this also results in the inability to afford insurance even with the federal tax subsidies available under the Affordable Care Act. Ct is expected to enroll 250k to 300k people in the Exchange which should give them the bargaining power to bring down costs but the Exchange will not negotiate with the insurance carriers and will only consider it in the future. “The assertion that there is no need to engage in active purchasing because the Exchanges website will readily sort for cost ignores the harsh reality that as with the Medicare Part D experience, the existence of a website generally does not result in the most effective choice being selected at least in the complex area of health insurance”. The reason why Connecticut is prohibited from negotiating rates is because the federal law is the province of the CID (Connecticut Insurance Department). After the Exchange completes its negotiations the negotiated rates are to be forwarded to the CID for its review and inevitable approval as well.

Frances G. Padilla, President, Universal Health Care Foundation testimony expressed Universal Health Care Foundation of Connecticut (UHCF) has monitored the insurance market place which is Access Health CT and compared it with the rest of the U.S.'s Exchanges. CT has one of the top enrollment operations in the U.S. The UHCF has heard that the insurance that is available for people to purchase on the Exchange is better is better and more affordable than what they previously had and this is coming from hundreds of people across the state. On the other hand we have also heard of people being unable to afford coverage and most of those people do not qualify for subsidies. CT has not put any provisions in place to protect consumers. Although the Exchanges purpose is to consolidate the buying power of small groups, they still lack the clout of large groups and have to rely on the Exchange to negotiate on the consumers behalf. “Negotiation around quality standards and expectations should also be strongly considered. The ACA is leaning toward an effective, sustainable health care system that delivers high quality, affordable care and improves health.

Senator Martin M. Looney, 11th District, State of Connecticut discussed the bill's purpose and how this legislation would lower prices for consumers in the state of Connecticut. It would allow the CID (Connecticut Insurance Department) to approve or reject insurance rates by assessing if the rates are actuarially sound but the Department does not negotiate rates with the insurers. If the Department rejects rates that aren't actuarially sound, and if the Exchange is allowed to negotiate prices, then this would protect both consumers and the insurers. This legislation would create sound public policy in the public interest.

Tom Swan, Executive Director, CT Citizen Action Group submitted testimony in support of SB 11. Currently CT's Exchange is leading in the country in meeting enrollment goals. The reason why we did not support this legislation last year is because we were not sure what the uptake of the products would be in the Exchange. The plans offered on Health Access have the highest premiums of any state run exchange. “Additional reasons include the success of public programs to not only save money, but also to improve health care delivery as can be seen through the successful implementation of Primary Care Case Management in Medicaid and the recent wellness programs adopted in the state employee health plan as part of the negotiations with SEBAC”. On behalf of the consumers we face potential change in our hospitals which would include cost, quality of care, and access to quality of care.

American Cancer Society stated the biggest issue with CT's Exchange is affordability and CT has the fourth highest premiums in the country. SB 11 would give the consumers more affordable rates by enacting the Exchange to negotiate premiums. This would also result in reduced cost for purchasers. Access Health should also be an “active purchaser” instead of allowing every health plan to participate despite the fact that it only reaches the minimum requirements. If this bill passes then the Exchange would be able to limit exchange participation to plans with high level of quality when the market conditions permit. Cancer patients need Access Health CT in order to feel confident when purchasing health insurance. We wish to make Access Health CT the strongest source of information and choices for Connecticut's consumers.

Victoria Veltri, State Healthcare Advocate Stated that there is already a mandate in place that allows Access Health CT to “do all acts necessary and convenient to carry out the purposes of the exchange.” The mandate also reduces the number of Connecticut consumers without health insurance and assist consumers with the selection of a Qualified Health Plan. In addition to the mandate in place there are also Federal regulations that extend the Exchange's authority to review rates. Under Conn. Stat. 38-1084(24) the Exchange will have to do everything in its power to ensure that the consumer gets the biggest bang for their buck. Although the Exchange does have authority to reject plans or rates that don't meet QHP(Qualified Health Plans) criteria the Insurance Department has the final statutory rate review to make sure that QHP's are actuarially sound. “we need to explore every option to make coverage affordable”.

NATURE AND SOURCES OF OPPOSITION:

Jennifer Herz, Assistant Counsel, CBIA testimony expressed this bill would require that Access Health negotiate premium rates with health insurance carriers. The result of this bill would lead to a decrease in choice and hamper positive results for fair competition in Connecticut's health care system. CBIA does advocate bettering our health care system in terms of quality and access. Insurers should offer new plans in the market with rates “driven by consumer demand”, since Connecticut's marketplace would be affected by this bill, the rates would also have to be offered on both inside and outside of the exchange. This bill will hamper competition and decrease consumer choice.

Susan Halpin, Connecticut Association of Health Plans “shares the states commitment to the ideals behind the ACA”. CTAHP thinks that SB 11 implements “active purchaser” in terms of limiting the number of carriers participating in the Exchange, or selective contracting, regulating premiums they charge. The carriers in the Exchange would be more competitive and offer lower premiums. This legislation would also stimulate innovation and quality as carriers seek to attract members based upon what they can offer. Allowing the Exchange board to regulate rates would also interfere with the Insurance Departments role of regulating the industry. “The state should stay the course in terms of its current approach”.

Reported by: Chris Chinnici

Date: 3/17/14