A health insurance proposal being touted as more affordable to Connecticut’s small businesses is--for many reasons--more likely just the opposite.
This week the Insurance Committee heard testimony on HB 5487, the product of House Speaker Chris Donovan's Working Group on Small Business Health Care.
Among other things, HB 5487 opens up the expensive and self-insured state employee health insurance pool to businesses with fewer than 50 employees.
While that’s a risky proposition in itself, the plan also doesn’t square with new federal healthcare reforms.
The concept of pooling is not new. In fact it has been a topic debated--and rejected--by the legislature for many years.
Essentially, the pooling concept assumes more is better: In this case the "more" is more insured individuals in the pool supposedly translating into lower costs.
If that were true--more people in a pool equals lower rates--then the nation’s auto industry and its huge purchasing pools would have some of the lowest-cost health insurance.
But that’s not the case. The American auto industry is burdened with some of the highest healthcare costs in the U.S. The reason is simple and unavoidable--health insurance rates are far more dependent on the medical costs of plan participants than on any other factor.
What’s more, HB 5487 would subject Connecticut taxpayers to potentially high costs. That’s because it would open to pooling a state health plan that is self-insured.
While this allows the state to avoid paying health insurance premiums, it also means the state has to pay all of the medical costs of the individuals it covers.
Everything would work out well if healthy, low-medical-cost individuals were to join the plan. But if less-healthy, higher-risk individuals were to join the plan (which is more likely) then the state—meaning, taxpayers--are on the hook to pay significantly steep medical costs.
Since the state employee plan is self-insured, it is unclear whether it could even be sold through Connecticut's soon-to-be-created health insurance exchange.
Federal law dictates that only fully licensed health insurance products may be sold through the exchange. By definition, a self-insured plan is not a fully licensed product. So, HB 5487 may run afoul of federal law.
CBIA strongly urges lawmakers to reject HB 5487 and preserve our balanced system of small employer health insurance rating.