The latest session at the Connecticut capitol has seen another round of healthcare reform legislation sought by Connecticut businesses scrapped in the latest iteration of a years’ long stalemate between two political factions; one pushing for Connecticut to create a government health insurance option for small businesses and another seeking to allow small businesses to pool their resources to form their own associations to purchase health insurance.

While both ideas have been pushed heavily by lobbying organizations and special interest groups, the result has been a split legislature where neither gets pushed through, and healthcare insurance costs continue to rise. This year was no different for the business industry, but Gov. Ned Lamont and majority Democrats have offered up a new version of a government-run healthcare option, although their two proposals differ in degree.

The latest iteration of this ongoing tug-of-war was put to bed this year when the Appropriations Committee rejected House Bill 5378, which would have allowed businesses to form mutual employer welfare arrangements (MEWAS). For the last four years, legislation allowing for MEWAs has been backed by businesses, chambers of commerce, nonprofits, and a bipartisan group of lawmakers, but ultimately shot down through the legislative process.

While the plan to allow MEWAs has been pushed heavily by Connecticut businesses and business associations, who argue it will help lower health insurance costs, it has been equally opposed by those who argue it is an inferior form of health insurance that operates outside the state’s regulatory control, is subject to rapidly increasing costs based on claims, and doesn’t offer the proper protections for employees. Opposition to MEWAs has largely come from inside the Capitol with the state’s healthcare exchange, Access Health CT, public sector unions, the Office of the Healthcare Advocate, and the Commission on Racial Equity in Public Health torpedoing the bills in the past through, at times, contentious lobbying efforts.

This year saw the same groups line up in support or opposition to the MEWA bill during a public hearing before the Insurance and Real Estate Committee, where passage of the bill saw full support from the minority party Republicans and majority Democrats split with a 9-4 final tally. Passed on to the Appropriations Committee, however, the motion failed 27-19, even with the support of the committee chairs.

Chris DiPentima, president of the Connecticut Business and Industry Association (CBIA), immediately released a statement decrying the bill’s failure and blaming “misinformation,” surrounding MEWAs.

“There’s simply no excuse for this kind of misinformation to prevent a meaningful option for employers to do the right thing by their employees. At a time when employers are being forced to choose between raising prices, cutting staff, reducing benefits, or dropping coverage, the time to act is now,” DiPentima said. “And for those legislators who say they support small businesses and their employees but voted against the bill—it’s clear their actions do not match their words.”

Those lawmakers, government entities, unions, and medical associations opposed to allowing MEWAs have in the past favored the Public Option — legislation put forward numerous times that would allow small businesses, unions, and potentially individuals to piggy-back on the state employee healthcare plan, similar to the Connecticut Partnership Plan, which allows municipalities to do the same.

The idea has been backed largely by progressive Democrats in the legislature, progressive organizations, and state employee unions, who argue the state-run program could lower insurance costs by not taking a profit and leveraging the state’s negotiating power with medical providers and pharmaceutical companies to keep costs low.

The idea has been pushed since the beginning of Lamont’s administration, and is opposed by insurance companies who argue it undercuts one of the state’s premier industries and gives the state an unfair advantage as the Public Option would not be subject to the regulations and fees imposed on insurance companies by the state and federal governments, and would be backed by taxpayers for any losses.

Lamont, who in the past has opposed the Public Option, offered as part of his budget this year a proposal to, “Establish a pathway for the ‘Connecticut Option,’ a publicly-designed and privately-administered health plan program,” which includes an initial feasibility study in House Bill 5041 that passed out of the Health and Human Services Committee by a wide margin.

In written testimony, Lamont said the Connecticut Option idea was based on the Colorado Option, which requires all insurers regulated by the state – small group and individual – to offer plans that are standardized to the health exchange plans, according to the Colorado Division of Insurance. Rather than the government directly insuring individuals and small groups, it would essentially require insurance companies to offer cost-controlled insurance plans to those within a certain income threshold.

Colorado also allows for MEWAs provided they meet certain conditions or obtain a waiver from the state.

While the CBIA opposed study of the Connecticut Option, warning that “any government-run healthcare model… inevitably leads to cost-shifting onto the open market,” the Connecticut Association of Health Plans (CT AHP), a long-time opponent of the Public Option, offered tepid support for the idea as it would include the private insurance market, but did echo CBIA’s warning about shifting costs.

“In addition to preserving a central role for the private market, a clear bright line in any Connecticut Option discussion must be whether a new reform model would result in additional cost shifting to the commercial market,” wrote Susan Halpin, executive director of the CT AHP. “Hospitals and other providers already face low Medicaid reimbursement rates, and the resulting cost shift to commercial coverage is a well-documented dynamic that contributes to higher premiums for employers and families.” 

Lamont’s proposal also includes tax credits up to $1,000 for employers with fifty employees or fewer who contribute toward the cost to employees for purchasing their own insurance through, for instance, the state’s health exchange.

However, support for the Connecticut Option drops off in another bill pushed by Majority Democrats that goes a step further by establishing and funding the Connecticut Option within the Office of Policy and Management, creates a $200 million healthcare subsidy slush fund, and creates a basic health plan in consultation with the Department of Social Services, all of which would be designed and overseen by a working group.

Essentially, rather than studying a Connecticut Option, SB 3 moves forward with establishing it, funding it, and creating a working group to design the program, making it more of a traditional “public option” the details of which will be determined at a later date based on the findings of the working group.

Both the CBIA and CT AHP opposed the bill, warning again that it will shift costs onto the commercial market, resulting in higher overall insurance rates. It was also opposed by the Connecticut Hospital Association, which argued the bill establishes “a new public option built on top of the current Medicaid program without addressing the underlying challenges” – namely, the underpayment for Medicaid services that hospitals have long argued is ultimately raising the costs for everyone. 

However, SB 3 received wide support from many other groups and individuals and sailed through the Human Services Committee. SB 3 has subsequently been referred to the Appropriations Committee and Lamont’s bill has been referred to the Finance, Revenue, and Bonding Committee for approval.

Neither proposal truly offers a design; under Lamont’s plan, the Connecticut Option would be studied for feasibility, under the Democrats’ plan the public option would be designed by a working group. However, past iterations of the public option have essentially relied on the State Partnership Plan, which allows municipalities to join the state employee health plan, as a model.

Since Partnership Plan claims are pooled with the state employee plan, it essentially uses taxpayer funds as a backstop, but the plan has run into trouble before, paying out more in claims than it received in premiums in four of its nine years, necessitating reforms. The program paid out $24 million more than it took in from premiums in 2025, which contributes to rising healthcare costs for the 187 municipal groups participating in the program. Some towns are warned away from participation by brokers due to the cost.

According to the Partnership Plan’s 2025 annual report, renewals for conventional plans rose 10.3 percent in July 2025. While that figure was similar to the 11 percent increase in small group insurance approved by the Connecticut Insurance Department in 2025, the Partnership Plan saw only a 2 percent average annual increase for active members in 2024, compared to a 7.4 percent increase for small group coverage in 2024.

“Today, Connecticut is considered the 5th most expensive state for health care. We also have the 2nd highest insurance coverage costs and 4 th highest annual premiums for individual coverage in the country,” Lamont wrote in testimony. “This is a strategic step-by-step approach that allows us to learn from other states that have already implemented state plans and evaluate the levers available to Connecticut to maximize participation and minimize enrollee costs.”

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