Report: State-Run Healthcare Proposal Leads to Tax, Premium Hikes – CBIA

A proposed state-run healthcare expansion would likely lead to tax hikes on residents and insurers, higher premium costs, and a possible 9,000 to 29,000 increase in the number of uninsured people, according to a new report.

Published by the health economics and policy firm KNG Health Consulting, the report echoes many of the same concerns that Gov. Ned Lamont, moderate Democrats, Republicans, and CBIA raised during the last legislative session.

The report analyzed SB 842, a bill introduced last year that proposed expanding the financially troubled healthcare plan the state administers for municipal employees to small businesses, nonprofits, and multi-employer groups.

The KNG report noted that existing state revenue from premium taxes and health insurance assessments would fall significantly under SB 842.

For example, the state currently receives over $300 million annually from taxes and assessments on state-regulated private insurance plans.

Because SB 842 exempted the municipal plan—known as the Partnership Plan 2.0—from from these taxes, KNG found taxes and assessments would fall between $71 million and $122 million in 2023.

Tax Levies

The state would then need to recoup that money by levying additional taxes on businesses and insurance companies.

KNG estimates that provider reimbursement rates in the expanded Partnership Plan would need to fall by 15% to secure financial solvency and prevent the need for future state subsidies.

KNG notes that in four out of six modeled scenarios, the number of uninsured residents increased between 9,000 to 29,000.

With employers moving to the state-run plan, and reimbursement rates dropping, this would place pressure on providers to recoup the lost revenue from private employer-sponsored plans, resulting in an increase in private-sector premium costs.

Due to the rise in employer-sponsored insurance premiums, KNG notes that in four out of six modeled scenarios, the number of uninsured residents increased between 9,000 to 29,000.

If provider rates were not reduced and existing taxes and assessments on private insurers decreased, the state would need to collect between $816 million and $1.1 billion in additional revenue to cover the deficit.

Bailout

The KNG report comes only weeks after the state Comptroller’s office used $40 million in federal COVID-19 relief funding to stabilize the Partnership Plan.

The federal transfer comes after the Comptroller’s office consistently told legislators last spring that the pandemic had a minimal impact on the plan’s finances.

The Partnership Plan’s latest financial statement also reveals continuing financial distress.

According to the data, the plan is projected to have a 98.7% medical loss ratio for the upcoming plan year. Including administrative costs of 2.4%, the plan will need to reduce benefits and/or increase premiums to remain afloat.

For more information, contact CBIA’s Wyatt Bosworth (860.244.1155) | @WyattBosworthCT