A bill to allow Connecticut business associations to offer their own healthcare plans, potentially lowering insurance costs for small businesses, would have to adhere to rules and regulations established under the Affordable Care Act, including coverage for pre-existing conditions, according to an analysis by the Office of Legislative Research (OLR).
However, the legislation could lead to a decline in revenue to state government if small businesses drop their small group insurance in favor of these Multiple Employer Welfare Arrangements (MEWAs), according to a separate analysis by the Office of Fiscal Analysis (OFA).
The bill, heavily supported by the Connecticut business associations and chambers of commerce, was the source of a contentious and long Insurance and Real Estate Committee meeting during which Sen. Matthew Lesser, D-Middletown, attempted to filibuster the bill, questioning Rep. Kerry Wood, D-Rocky Hill, for hours on end.
Lesser finally ended his questioning after he indicated the governor’s office had reached out to him indicating they also had a number of concerns with the bill and offered to help address those issues.
Proponents of the bill argue it will allow small businesses to save money on health insurance through large associations utilizing purchasing power to obtain better prices thereby leveling the playing field between small businesses and large employers.
Lesser, however, expressed concerns both in the meeting and afterward on Twitter that health coverage under association health plans would allow discrimination against those with pre-existing conditions and destabilize the insurance market, an issue also raised by the Connecticut Hospital Association.
“The bill would allow the sale of junk plans (technically not even insurance) that would be free to discriminate in all kinds of ways,” Lesser wrote on Twitter. “The problem is that this could destabilize the entire health care marketplace, threatening care for us all,” echoing arguments made by opponents, including multiple medical associations like the American Lung Association and the Multiple Sclerosis Association.
The bill allows for two forms of MEWAs – one a fully insured MEWA, which means the association purchased an insurance policy from a Connecticut insurer, and a self-funded MEWA, which is a health benefit plan not fully insured by an insurer.
According to OLR’s analysis, self-funded MEWAs would have to offer the ACA’s essential health benefits, all state mandated health insurance coverage, not limit or exclude coverage based on pre-existing conditions and not discriminate based on health status when it comes to eligibility, premiums or contribution requirements and be subject to federal ERISA regulations.
However, “each employer member shall be liable for such employer member’s allocated share of the liabilities of the sponsoring association,” and “each employer member may be responsible for paying an additional sum if the annual premiums present a deficit of funds for the trust.”
Likewise, fully insured MEWAs would be subject to federal regulations for large group market plans, including coverage of pre-existing conditions and adhere to all ACA requirements for large group plans.
A separate analysis of the bill by the Office of Fiscal Analysis indicates that the legislation could come at a significant revenue loss for Connecticut state government and the state’s health insurance exchange Access Health CT.
According to the fiscal analysis, “significant uptake” of MEWAs by small businesses could reduce the amount of revenue coming into the state through Connecticut’s insurance premiums tax, which collected $204.7 million in 2022 and significantly reduce revenue to Access Health CT, which receives funding through a 1.65 percent assessment on individual and small group premiums.
Connecticut’s health exchange, which helps low-income individuals obtain low-cost insurance, derived nearly half of its $31.4 million in revenue for fiscal year 2023 from small group premiums. “If there was a 10% reduction in fully insured small group premiums as a result of the bill, exchange revenue would be anticipated to decrease by approximately $1.5 million,” the OFA wrote.
“Given that fully insured small group market enrollment has been decreasing in recent years, further enrollment reductions from the bill could contribute to a smaller, deteriorating risk pool for those small employers remaining in the fully insured small group market,” OFA continued.
The legislation passed out of the Insurance and Real Estate Committee with a 9-3 bipartisan vote and may come up for a vote in the House of Representatives.
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The claim that association plans would not cover pre-existing conditions ignores the fact that such plans are voluntary relationships. No one is forced to buy such a plan. If you’re a small business and have employees with pre-existing conditions that you want covered, if the association MEWA doesn’t cover it, you can always buy a more expensive plan that does.