CONNECTICUT: HUGE! Gov. Lamont rolls out "Connecticut Option"!

Last October, shortly before the midterm election, Democratic gubernatorial nominee Ned Lamont of Connecticut announced that if elected, he'd push hard for a robust reinsurance program along the lines of other states which have successfully implemented reinsurance 1332 waivers under the ACA:

HARTFORD, CT — Democratic gubernatorial candidate Ned Lamont has much lower expectations for what he’s going to be able to do to improve the health of Connecticut residents than one might expect from a Democratic candidate this year.

Sounds like Lamont would not push for CT to reinstate the ACA individual mandate penalty:

...Does he believe everyone in Connecticut has to purchase health insurance now that it’s not mandated by the federal government?

“I don’t right now,” Lamont said. “And I’ll tell you why, because I just don’t know if the subsidies and protections for people to make it affordable for them are going to be coming out of this Trump administration. So until we know what those subsidies are, until we know what it would cost people, I think I’m gonna have to wait on that.”

State Comptroller Kevin Lembo said he also opposes an individual mandate at the moment because “affordability is a question and the quality of plans is a question.”

He said once the state can make those plans affordable then it can ask everyone to purchase insurance, “but I don’t think we’re there yet.”

Here's the reinsurance part:

...He said he also wants to take advantage of the reinsurance program offered by the federal government. He said states that have taken advantage of it have reduced premiums. He wants to reduce premiums 20 percent.

Well, Lamont did indeed win the election, became the next Governor of Connecticut...and sure enough, both he and the Dem-controlled state legislature wasted no time in pushing ahead with healthcare reforms and ACA improvements:

Connecticut lawmakers are joining other states that have unveiled proposals to expand government-run health coverage, with plans to extend state health benefits to small businesses and nonprofits, and to explore a public option for individuals.

Under two measures announced Thursday, officials would open the state health plan to nonprofits and small companies – those with 50 or fewer employees – and form an advisory council to guide the development of a public option. The legislation would allow the state to create a program, dubbed “ConnectHealth,” that offers low-cost coverage to people who don’t have employer-sponsored insurance.

Comptroller Kevin Lembo’s office would partner with one or more private insurers under an umbrella contract to provide plans outside of the state’s risk pool. The plans would meet the standards outlined in the Affordable Care Act.

That was in March. A month later, this happened:

Connecticut’s House of Representatives voted Wednesday to strengthen state health insurance laws by making sure residents with pre-existing conditions are protected.

House Bill 5521 passed unanimously by a 146-0 vote, and now goes to the Senate.

...A few Republicans questioned Scanlon about the bill, stating they were primarily concerned about whether the legislation would increase the cost of insurance on Connecticut residents if the Affordable Care Act is eventually repealed at the federal level.

...Scanlon said the legislation expands former Insurance Commissioner Katharine Wade’s August 2018 bulletins, which said that “any short-term limited-duration plan to offer the ACA’s essential health benefits for policies sold in the individual market,” and “any renewable short-term limited-duration health plan and any short-term limited-duration health plan longer than six months cannot exclude pre-existing conditions.”

The legislation expands pre-existing condition coverage to plans shorter than six months.

...The bill the House passed Wednesday also doesn’t require documentation by a medical professional to prove someone has a pre-existing condition. Scanlon said that’s currently part of the ACA that they are looking to make state law.

...Last year, Connecticut lawmakers passed HB 5210 to provide some extra protections to its health insurance law.

HB 5210 protects the ACA’s essential health benefits, such as prescription drug coverage, maternity care, pediatric services, and preventative care, for anyone who has a plan regulated by the state Insurance Department. It also requires some plans to provide preventive services for women, children, and adolescents at no cost.

...all of which lead up to today's big announcement (which mostly follows up on the March news...and then some):

Governor Lamont, Comptroller Lembo, and Legislative Leaders Announce Major Health Care Improvements to Lower Costs for Families, Nonprofits, and Small Businesses: The Connecticut Option

  • New Health Care Plans Will Deliver Savings of 20 Percent Below Current Average Market Premium Costs

Governor Ned Lamont, Comptroller Kevin Lembo, and legislative leaders, particularly the co-chairs of the legislature’s Insurance and Real Estate Committee, Senator Matt Lesser and Representative Sean Scanlon, announced today they have reached consensus on a proposal that will provide Connecticut residents more affordable, high-quality health care.

Under a new “Connecticut Option,” individuals and small businesses will have the choice of buying a new high-quality, high-value health care plan that could save them up to 20 percent in premiums. Consumer advocates and health care policy experts will assist the Office of Health Strategy (OHS) in designing the Connecticut Option, which insurance companies will be able to offer through their own provider networks or through a network developed by the Office of the State Comptroller. Offered alongside current high-quality plans on the exchange, Connecticut Option plans will leverage our incredible public agencies and one of the state’s leading industries to provide innovative alternatives tailor-made for our residents and employers.

Back in the days when the ACA was being developed, I recall there being a lot of discussion about simply taking the existing Federal Employee Health Benefits Program (FEHBP), which provides coverage to around 8 million federal employees and their dependents, and opening it up to the public. It's important to note that, like the state-level plan described here, the FEHBP is still largely administered by private insurance carriers...but it's a stable existing infrastructure which also has the benefits of economy of scale, etc.

So far this sounds like a smarter version of the just-signed Washington State public option, which also involves the state contracting with a private carrier to administer the program but which isn't coupled to the state employee agency plans.

However, the Connecticut announcement doesn't stop there:

The proposal also takes several steps to lower costs in the individual market. It provides additional financial assistance to low-income residents who qualify for federal subsidies and more middle-class residents who currently struggle with the high cost of health insurance. That assistance will be funded by restoring the responsibility fee on residents who can afford but choose not to purchase health insurance. The proposal also restores the reinsurance program that reduced premiums in the early years of the Affordable Care Act (ACA). Similar programs in other states have reduced premiums by more than 10 percent. Finally, it increases competition in the market by requiring insurance companies that serve state employees to also provide cost-effective plans through the exchange.

Boom! I'll have to read more about the details here, but it sounds very much like this checks off several more boxes on my "If I Ran the Zoo" wish list from a few years back, including:

  • #7a: Beefed-up subsidies for those below the 400% FPL income threshold (already subsidized), similar to what Vermont and Massachusetts do,
  • #7b (sort of): Some amount of subsidies for those over the 400% FPL threshold (similar to what Washington State is doing from 400-500% FPL and California is proposing to do from 400-600%),
  • #9 (sort of): Reinstating the Individual Mandate at the state level after all to fund the increased subsidies (similar to what California is proposing),
  • #13: Establishing a Reinsurance program at the state level, the way a bunch of other states have already done, and...
  • #12. Contractually Tie MCO Contracts to Exchange Participation (not quite): Instead of managed Medicaid contracts, carriers would be enticed by state employee contracts instead, which amounts to pretty much the same thing.

WOW! When you also include #19 on my list (the Public Option), that's 5 or 6 items on my list in one package!

But wait, there's still more!

In addition to improving the individual and small group markets, the proposal is designed to bring better care at a lower cost to all Connecticut residents by empowering the OHS to monitor health care spending growth, establish an annual cost growth benchmark, and recommend data-driven solutions to lower costs. That transparency and accountability will help curb price increases across health care providers, insurance carriers, pharmacy benefit managers, and drug and medical device manufacturers.

Under the proposal, Connecticut will join Vermont, Florida, and Colorado in petitioning the federal government for permission for the state to safely import prescription drugs from Canada at greatly reduced prices, upon federal approval.

OK, this isn't quite #15 on my list ("let Medicare negotiate drug prices"), but it's fairly close.

Lastly, the proposal places a small tax on the prescription opioids that have fueled our current public health crisis. The revenue collected from that tax will help restore Medicaid coverage to several thousand of the parents who lost access to that vital program under the state’s last budget.

Again, the devil will be in the details, but overall this sounds like a fantastic package of improvements.

The press release doesn't go into details about the dollar amounts involved, but this Patch article gives a few more details:

The Connecticut option would start in 2022 and have costs 20 percent lower than average premiums on the exchange in 2020, according to the proposal.

...The proposal also has some measures to help people with financial assistance, including subsidies for low-income residents who qualify for federal subsidies and middle class residents who struggle to afford insurance. That part of the plan will be funded through a "responsibility fee" for residents who are able to afford, but choose not to buy health insurance. The fee is similar to what was previously called the individual mandate under the federal government. The federal individual mandate was killed for the 2019 plan year. The individual mandate would raise about $25 million, Lesser said.

...Also part of the proposal is to add a one cent per milligram tax on prescription opioids to fund Medicaid coverage for parents who lost coverage under the last state budget.

A 2022 start date is a bit disappointing; 2021 should've been feasible, although there's no way they would be able to hit 2020.

Hmmm...$25 million to cover additional subsidies for the 138 - 400% FPL crowd and those over 400%? What would that break out to?

Well, 111,000 Connecticut residents selected on-exchange policies this year. Of those, around 78,000 are currently receiving APTC subsidies, averaging around $516/month or $6,200/year. Connecticut's total ACA-compliant individual market is around 136,000 people, so that's roughly 58,000 unsubsidized enrollees total (33K on exchange, 25K off-exchange).

If you assume that, say, 1/3 of that $25 million is provided to those currently subsidized and 2/3 is provided to those currently not subsidized, that would amount to something like $120/year for the subsidized crowd ($10/month) and perhaps $240/year for unsubsidized enrollees ($20/month) on average, although it's hard to say without knowing the details or whether there's a cut-off point (in California subsidies will be available up to 600% FPL).

That's not a huge improvement given that the average unsubsidized premium for ACA individual market coverage in Connecticut is around $625/month, but every bit helps. And of course the Reinsurance waiver, if approved, would also lower unsubsidized premiums further (the claim is a 20% reduction over 2020 rates. Assuming 2020 is flat vs. 2019, that'd mean an average drop of $125/month per total enrollee.

Assuming the total enrollment numbers would otherwise remain flat for 3 years straight (unlikely, to say the least!), that'd mean the reinsurance program would have to come up with around $204 million, minus the $25 million in mandate penalty/subsidy funding, or $179 million/year to hit that reduction level. Depending on how robust the reinsurance waiver turned out to be, as much as 3/4th of that total would come from the federal government, meaning the state would still have to come up with around $45 million/year.

Where that money could come from I have no idea, but I'm keeping my fingers crossed that the entire package goes through as promised. Stay tuned...