Roughly thirteen percent of Connecticut residents who are enrolled in state-regulated health insurance plans pay $18.4 million annually to support three state agencies through an assessment on their health insurance, according to a report issued by a Connecticut working group charged with tracking money spent through the state’s Insurance Fund and its impact on the cost of insurance.

Of the 480,000 insured lives who are paying that $18.4 million, 200,000 are covered under individual and small employer plans. The vast majority of Connecticut residents participate in self-insured plans, which are not regulated by the state, or they participate in Medicaid or Medicare, according to the report

The Insurance Fund consists of three assessments levied on all forms of insurance that generate roughly $104 million per year and is used to fund a variety of state agencies and programs. The assessments, however, are paid by insurance consumers, therefore acting as a hidden tax.

The General Assessment accounted for $37 million over the past year and helps fund Connecticut Insurance Department (CID), the Office of Health Strategy (OHS), and the Office of the Healthcare Advocate (OHA); the Public Health Assessment accounted for $12 million and funds health initiatives like a syringe exchange program and breast and cervical cancer detection; and finally, the Health and Welfare Assessment is used to lower the cost of vaccines through bulk purchasing under a federal contract and accounts for $56 million per year.

“With regard to the General Assessment, the amounts paid by health insurance companies and health care centers are determined based only on the fully insured business written,” the report states. “As a result, 13% of Connecticut residents currently bear the expense of the General Assessment costs that are responsibility of the health carriers, which is approximately 50% of the total assessment or $18.4 million.”

“The working group believes that action should be taken to mitigate the financial impact of the Insurance Fund on Health Insurers and their policyholders,” the report said. 

The remainder of the General Assessment funds come from all other insurance lines, including property, auto, life and long-term care. According to the report, non-health insurers questioned why they were paying assessments for agencies that had nothing to do with them. 

The $104 million collected through all three assessments sends $37 million to the Connecticut Insurance Department, $46 million to the Department of Public Health, $13.7 million to the Office of Health Strategy – which, ironically, is tasked with helping lower insurance costs – and $4 million to the Office of the Healthcare Advocate. 

The money is also used to fund employees in other departments, like the Office of Policy and Management, Department of Housing, and the Department of Administrative Services, to tune of several million dollars each year.

According to the report and the working group’s findings, many of these programs, positions, and agencies started out being paid for through the General Fund but were gradually shifted to be paid through the Insurance Fund as Connecticut faced numerous budget challenges during Gov. Dannel Malloy’s administration.

In 2014, the Insurance Fund accounted for $29.88 million in expenditures and has since grown to over $100 million by 2024, according to the state’s open budget records. The working group argues a significant portion of those costs should be moved back into the General Fund to be paid by all taxpayers, rather than being levied against a subset of insurance rate payers who already face rapidly rising premium costs, particularly for health insurance.

The working group recommends moving the public health programs and costs for state agencies like OHS back to the General Fund over a period of five years while keeping the vaccine program within the Insurance Fund because it ultimately benefits consumers through lower vaccine costs, saving insurance companies $23.8 million in 2024. 

“The working group finds that these programs are more appropriately funded under the General Fund where the expenses are spread across the wider sector of the population that they are intended to benefit rather than on insurance policy holders, which will reduce CT policy holders’ annual premiums,” the final report said.

Gov. Ned Lamont, on the other hand, is looking to add another $1 million in costs to the Insurance Fund as part of his budget proposal by increasing the Office of Health Strategy budget from $13.7 million to $15.1 million in the first year. OHS’s share of the Insurance Fund budget has grown from $2.7 million when it began in 2019 to $13.7 million last year, accounting for most of the agency’s budget. 

“I think that this was a really needed exercise; I’m really happy that this team was brought together,” said Rep. Kerry Wood, D-Rocky Hill, who served on the working group. “The Insurance Fund needs to be a fund that is related to insurance, and I think everyone would be on board with that. When it starts covering things outside of insurance, outside of oversight and regulation of insurance products, it becomes a very tough sell to the public.”

They also recommended the Office of Policy and Management provide yearly reports on the status of the Insurance Fund to the appropriate legislative committees, and the General Assembly should “implement a legislative process for the approval of any future assessments to the Insurance Fund.”

The working group was formed after a bill was proposed to move the entirety of the Office of Healthcare Strategy and Office of the Healthcare Advocate under the Insurance Fund, which would have added an additional $3.7 million to the overall insurance assessments.

“Before this gets too large, let’s put a policy in place that includes transparency and legislative oversight for adding new assessments, so it doesn’t become a place where we just keep adding projects that we don’t know how to fund,” Wood said.

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