While states like Colorado and Nevada are forging ahead with their public option legislation to tackle rising health care costs, similar efforts in Connecticut came to an early end in late May when the bill lost Governor Lamont’s support.

Not the First Rodeo: Connecticut’s Past Attempts to Pass a Public Option Bill

This is not the first time Connecticut has attempted to establish a public option. The state tried and failed to enact similar legislation twice in the last two years. In 2019, a proposed bill sought to establish a “Connecticut Option,” a subsidized option for small companies and individuals, which legislators wanted to pay for by establishing a state-level fine for not having health insurance (often called an “individual mandate”). However, the Connecticut House ultimately passed a final version that had none of the above provisions and simply required providers to disclose their prices, costs and payments received, and set certain yearly benchmarks for health care price growth. Even in this limited form, the Connecticut Senate never brought the bill up for a vote.

In 2020, the Connecticut legislature once again introduced a public option bill that would have allowed small businesses and nonprofits to join the state employee health plan and created a public option on Connecticut’s health insurance marketplace. The bill foundered when, due to the COVID-19 pandemic, the legislature shut down and never returned for a regular session.

Back for Round 3: SB 842

This year, the Connecticut legislature yet again introduced a public option bill, SB 842. This bill would have:

• Required the state employee health plan to offer health care coverage to those in unions, employed by small employers and nonprofits, and required that the costs to cover these workers be pooled with state employees and retirees.
• Required the administrators of the unions and small and nonprofit employers to pay the state employee plan for this coverage at the same amount that the state pays for its employees under the plan.
• Allowed premiums for these plans to vary by age in accordance with the Affordable Care Act, as well as geographic area, family size, and plan design or network differences.
• Required coverage to be consistent with value-based insurance design principles and be approved by the state’s Health Care Cost Containment Committee.
• Required coverage to include essential health benefits under the Affordable Care Act as well as comply with Connecticut’s state benefit mandates.
• Allowed the state employee plan to charge the union or the small/nonprofit employer a per member, per month administrative fee.
• Required the state employee plan to mitigate financial risk to the state by purchasing stop-loss insurance on behalf of the unions and small and nonprofit employers and establish a “risk fund,” financed by assessments on these entities to pay any claims that exceed the premiums collected.
• Allowed plan designs and benefit coverage levels for unions and small and nonprofit employers participating in this plan option to vary from the plan designs and benefit coverage offered to state employees as long as the plan does not qualify as a high-deductible health plan as defined by the IRS.
• Included an assessment on insurers to bring in $50 million per year to fund additional subsidies for those enrolled in Connecticut’s insurance exchange.

SB 842 Loses Steam in the Midst of Stiff Criticism and Lack of Support

Unlike in Washington, Nevada and Colorado, states that have made progress on their public option bills, Connecticut’s insurers came out in force against the public option proposal, perhaps because it is targeted to employers, a larger and more profitable market segment for the industry than the individual market. Five Hartford-based insurance companies sent Governor Lamont a letter opposing SB 842 and saying they would move their workers out of the state if it were enacted. Governor Lamont’s spokesperson said that the Governor never fully supported the public option bill in the first place because he thought that giving a “potential blank check” to the state to establish a public option was imprudent. When the federal American Rescue Plan Act was enacted in March, providing expanded subsidies for marketplace plans, Gov. Lamont was reportedly further dissuaded from supporting the public option bill.

While the American Rescue Plan is proving to be very helpful to millions of marketplace enrollees, its enhanced subsidies are temporary and do nothing to reduce the underlying drivers of high and rising health care costs. Furthermore, the American Rescue Plan’s subsidies are not available to the small businesses and nonprofits that are the target of Connecticut’s public option proposal. Employers, particularly small ones, are increasingly buckling under the weight of exorbitant hospital and drug prices, in particular. Connecticut’s effort was designed to help them take advantage of the purchasing power of the state employee plan. Ultimately, however, the political power of the state’s main industry – insurance – held sway, at least with Governor. The insurance companies may have won this particular battle, but over the long term if they do not take greater actions to push back on provider prices and relieve the strain on employer purchasers, they may find they’ve lost the war.