A new working group established under the 2024 budget is looking at more than $100 million per year in assessments levied on Connecticut insurance companies which supports state agencies and employees, as the General Assembly continues to search for ways to lower Connecticut’s health insurance costs.
The Working Group to Study Payments by Insurance Companies for Deposit into the Insurance Fund (Insurance Fund Working Group) is examining the history of the Insurance Fund and how the fees on insurance companies established in 1991 to support Connecticut’s Insurance Department are, more and more, being used for additional employees by a growing number of agencies.
According to a report by the Office of Legislative Research (OLR), the assessments and fees on insurance companies amount to roughly $103 million per year which get split among ten state agencies, including the Insurance Department, the Department of Public Health, the Office of Health Strategy, and the Office of the Healthcare Advocate.
Although the assessments are not solely levied on health insurance, health and accident insurance do make up a majority of the assessment fees received by the state.
A majority of the payments – roughly $82 million – go to the Insurance Department and the Department of Public Health (DPH). The funds cover a majority of the Insurance Department’s budget, according to OLR, and at DPH the money supports a needle and syringe exchange program, children’s health initiatives, breast and cervical cancer detection, and immunization services, among other things.
According to OLR’s report, the fund is also being used to pay for employees at the Office of Policy and Management (OPM), the Homeowner Advocate at the Department of Housing, and for employees and IT services at the Department of Administrative Services.
However, working group members are concerned about how these fees may be trickling down to consumers through increased premiums, and how state agencies are increasingly dipping into the Insurance Fund to support their growth with little to show for it. During their meeting on September 18, working group members, including the chairs of the powerful Appropriations Committee, openly wondered if some of these costs should be covered by the General Fund.
During that meeting, several agency representatives were called to the floor to describe how they are using the funds and to what ends. OPM Chief Administrator Yvonne Addo said the nearly $650,000 in Insurance Fund money spent by OPM goes to support three employees who “support the insurance industry as it relates to long-term care and healthcare statewide,” Addo said.
One of the positions is a Tobacco Trust Fund support position, something working group chair Rep. Kerry Wood, D-Rocky Hill, questioned as it is not related to insurance.
However, it was the massive growth at the Office of Health Strategy (OHS) that had lawmakers on the working group asking hard questions and leveling criticism at the agency whose mission is to find ways to reduce health insurance costs in Connecticut.
According to slides presented by OHS, the agency that began in 2019 with a budget of $2.8 million has, after only five years, ballooned to more than $13.7 million, the vast majority of the growth coming under “Other Expenses.” Chief of Staff for OHS Kim Martone said that the spikes in costs were largely related to more personnel being paid for by the Insurance Fund rather than the General Fund.
Sen. Cathy Osten, D-Sprague, and co-chair of the Appropriations Committee heaped praise on the Office of the Healthcare Advocate before leveling criticism at OHS, particularly following a state audit that found OHS paid a contractor for work not performed, and failed to complete evaluations for contracts totaling $17.6 million.
Osten described the audit as “just awful,” and said it was reflective of the agency not monitoring the money, while continually pressing the legislature for more staff and more funding.
“We find it to be an extremely bad sign as to what’s going on there, but continually each year you have asked for more staffing. That staffing would not drive down healthcare costs, that staffing would drive healthcare costs up because it’s paid out of the Insurance Fund,” Osten said.
Osten said that had lawmakers approved all of OHS’s requests for funding they would be doubling the money currently allocated.
“I just don’t understand, if the main focus of Healthcare Strategies is to drive down costs of healthcare, why you would want us to add in another $13 million or so,” Osten said. “I’m failing to see the value of a group that’s not driving down the healthcare costs, not managing the dollars correctly.”
“I think some of this has to go back to the General Fund so we can start driving some of the costs down,” Osten said.
However, according to OLR’s report, increased costs for the Insurance Fund are right around the corner. The report notes that immunization services through DPH, which are paid for by the Health and Welfare fee on insurance companies, are projected to increase from $34.2 million in 2024 to $64.2 million in 2025.
Additionally, during the 2023 legislative session, the General Assembly approved the creation of the Office of the Behavioral Health Advocate, which will “advocate for and assist behavioral health providers,” along with a committee that oversees the behavioral health advocate. According to OLR, that new office costs $857,000, which comes out of the Insurance Fund.
“That office was created, it directly affects the Insurance Fund, but that bill and the creation of that did not go through the Insurance Committee,” Wood said. “A lot of these things are created with wonderful intentions – who doesn’t want to go to an advocate to work on behalf of them? – but that was created and then the Insurance Fund really assesses the people they’re trying to help by causing rates to rise.”
In addition to the various agencies supported by the Insurance Fund, Connecticut’s health insurance exchange, Access Health CT, also levies a fee on insurance companies “who are capable of offering a qualified health plan through the Exchange” to support itself, including small group health insurance, one form of insurance coverage that has been losing insurers and raising rates continuously as small businesses find new options.
According to AHCT’s financial reports, the agency took in $31.3 million from insurance marketplace assessments in 2023, down from $34.2 million in 2020, “due to fluctuations in the underlying carrier premiums.”
“This has had a direct impact of increasing insurance premiums,” said Insurance Association of Connecticut President Eric George, who serves on the working group. “I fully support what you guys do and I think that it should be borne by the biggest payer base possible and that is the General Fund.”
“I’d like to place blame where blame is and it’s with us,” Osten said, indicating it was the legislature who approved adding these costs. “This is very much similar to the energy costs where we have added in on the legislative side some things.”
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An excellent investigative piece that makes really important points. We live in a state where the majority of health plans are self funded which means that the CID has virtually no jurisdiction. Further, OHS has done nothing to incentivize the reduction in healthcare costs in the state despite having purview over the state’s All Payer’s Claims Database which would give employers access to actionable information on cost/quality variation between health systems. The Healthcare Cost Benchmark has no teeth and has done nothing to incentivize health systems to reduce or change their cost structures. So, in short, these assessments to carriers are getting passed along to taxpayers and there’s no value to be measured from them. Other states are spending money on initiatives that create transparency and accountability for health services prices AND they’re creating incentives for providers and systems to take risk on patients and their outcomes. Time for big changes in the priority of health policy and for some accountability related to these assessments.
Very interesting article. I was looking through the article on what the direct impact of these funds paid by Insurance carriers has had on the increase in health premiums but was unable to find that information. This information would be helpful to the reader as well.
It is shocking to read that The Tobacco Fund is mentioned in the article! Is it for anti – tobacco education?