A year after the governor’s veto, House Speaker Christopher Donovan is renewing his effort to open the state employee health insurance plan to municipalities, nonprofits and small businesses, this time proposing a self-insured model that he says could save the state millions.
Under the model, the state would become the primary insurer, paying for medical claims out of its own coffers and eliminating overhead costs that insurance companies incorporate into premiums.
For years, Donovan has pushed to allow some non-state employee groups to join the state’s health insurance pool, claiming it would drive down costs by increasing the state’s bargaining power and reducing administrative expenses.
But Gov. M. Jodi Rell has been cool to the idea. She vetoed a similar plan last year, claiming that it lacked details on cost and because some insurers had threatened to raise rates if they had to accept non-state workers.
This time, however, Donovan is working with the advantage of a veto-proof majority of Democrats in the Legislature.
Donovan said his latest proposal would save the state $72.5 million in the first month and avoid the potential of having to rework contracts with insurance companies.
“A self-insured plan will allow the state to realize long-term savings by directly managing the medical claims and health service utilization,” Donovan said in recent testimony to the Insurance and Real Estate and Human Services and Public Health committees. “The state will be able to create real incentives for wellness and prevention and use scientific data for case management services to keep health care costs down.”
But opponents say it makes little sense to open up the expensive, benefit-rich pool at a time when lawmakers struggle with a projected $8.7 billion deficit.
“While well-intentioned, it will not lead to reducing the number of the uninsured nor will it reduce costs,” Office of Policy and Management Secretary Robert Genuario said in his testimony to the committees.
“In fact, the evidence indicates that this proposal will increase our costs for public employee health benefits at a time when we are struggling to make resources available to meet the needs of our most vulnerable populations,” Genuario said.
In his testimony, Genuario called the bill “fundamentally unworkable,” and said the costs for the state’s health insurance plan will dramatically increase if the state employee pool is expanded.
Genuario said the state is already bound by existing contracts with three different insurance companies and has procured caps for premium increases over the next two years. Those caps would be eliminated, however, if the state switched to Donovan’s plan.
He also said that the state has had high claims experience this fiscal year, so converting to a self-insured plan would cost more money and would shift more risk to the state.
According to information from the comptroller’s office, Genuario said switching to a self-insured plan could result in fiscal year 2010 rates that are 5.9 percent higher than the cap guarantee under the existing plan. That would result in an additional $69 million in health costs for state employees.
The state would also have to set up a reserve fund of at least $100 million, Genuario said.
Donovan, who is working with Lt. Gov. Michael Fedele, Rell’s point-man on the bill, disagreed with Genuario’s assessment that the plan is “unworkable.”
“I said, ‘Let’s work together,’ and [Genuario] comes out and blasts it,” Donovan said in an interview. “It wasn’t very helpful.”
The Connecticut Business & Industry Association, a major opponent of last year’s bill, also opposes the latest plan.
“The plan would move Connecticut closer to a government-run health system,” said CBIA attorney Eric George. “This is simply not in line with public opinion.”
Comptroller Nancy Wyman, a longtime proponent of pooling, said she is working with Donovan to include language in the bill that would allow her to deny participation to groups that would shift disproportionate risk to the plan.
“You can’t just give us your bad risk,” said Wyman, who would prefer to have a separate pool for small businesses and nonprofits. “If you give us one bargaining unit that is only the high-risk people, we can say ‘no’ to that.”
Donovan’s plan has the support of Attorney General Richard Blumenthal, Secretary of State Susan Bysiewicz and some unions, who claim municipal workers need more affordable and comprehensive health care coverage.
When Rell vetoed last year’s plan, she said she would be willing to work with Donovan to improve the bill this year, and designated Fedele to lead discussions with him this session.
In February, the Connecticut HealthFirst Authority — comprised of Fedele, insurers, union representatives and health care executives — finished an almost two-year study containing health care recommendations to the Legislature. The authority issued its final report without coming to a consensus on pooling — the most contentious issue.
ConnectiCare CEO Mickey Herbert, a voting member, has said the report would likely hold little weight with policymakers.
“I think the Legislature will go ahead and pass a pooling bill like that anyway,” Herbert said.
