A Risky Plan: Connecticut’s Public Option Proposal

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Connecticut’s Partnership Plan 2.0, the basis for the public
option, is a health plan run by the state comptroller that
piggybacks on the state employee health plan network
to provide comparable benefits to local government
employees. But premium and claims data show it has
operated at a significant loss, engaged in predatory pricing
to capture market share, and used premiums from new
enrollees to conceal red ink. Had such unsavory tactics
been attempted by a private insurer, the state Insurance
Department likely would have shut down the plan
years ago.

What is a public option? 

At its core, a public option proposal aims to enroll businesses and individuals for health care coverage under a new state government-run program. Like Medicaid and Medicare, it is premised on a reduced provider fee schedule that, if passed, will destabilize the current health care system, require a cost shift to private purchasers of health care, and/or result in increased taxes and fees. 

Imagine that the state offered every resident a mid-sized Ford sedan for $100 a month. The price of the Ford subsidized by 1) a reduced charge from Ford in return for volume and 2) a surcharge (cost-shift) on other dealerships like Chevy, Buick, and Dodge. Fast forward, and it is only a matter of time before the other dealerships listed are priced out of the market because they can’t compete with a $100 Ford.  In response, the subsidized cost of the Ford skyrockets to $1,000 a month and consumers are left with no other choice but to pay the huge new price tag because the rest of the market has evaporated.  That is public option in a nutshell.    

Health insurance carriers welcome competition if the rules are the same for everyone. Despite rhetoric to the contrary, the private market has responded to the need for affordably priced products structured around innovative, value-based benefit designs. There are fixed costs, however, like taxes and assessments levied on fully insured policies that inflate the cost of premiums — costs the Comptroller doesn’t have to pay on his Partnership Plan.  

What can be done to lower insurance premiums? 

Premiums are a reflection of underlying health care costs.  Coalition members agree with the need to reduce the cost of health care services and therefore the cost of health care coverage, but such measures need to be undertaken in a deliberate and thoughtful manner.   

First – do no harm.  Connecticut policymakers must refrain from adopting new mandates and policies that add to the bottom line of health care costs and therefore health care coverage premiums.   

Member carriers are in discussions with the Office of Health Care Strategy on implementation of Executive Order #5 establishing a new health care cost benchmark growth target. The benchmark process has been proposed to ensure access to quality, affordable, health care coverage that builds upon the strong foundation of the Affordable Care Act without undermining its underpinnings.  

  • One straight-forward way to reduce premiums is an across the board repeal of the 1.5% premium tax and associated assessments levied on fully-insured policies.  This revenue will be lost anyway if a government-run public option is passed.  The Comptroller is not subject to taxes.  
  • Fix the current emergency room surprise billing statute so that providers aren’t financially incented to be out of network.   
  • Maximize federal reimbursement policies. Consider the opportunities afforded by 1332 waivers to establish reinsurance programs or other relief to those most in need, but be wary of adopting funding mechanisms that tax premiums as a way to redistribute financial relief.   

Background 

Final FTI Report Connecticut-Option 5.26.21Download

Learn why other stakeholders oppose state-run public option bills.