A proposed $50 million annual tax to fund subsidies for an expansion of state-run health insurance will only drive up health care costs for everyone else, according to businesses and Republicans who oppose its inclusion in Democrats’ high-priority public option legislation.
Chris DiPentima, president of the Connecticut Business & Industry Association, said subsidizing insurance is important to businesses because many owners and employees use the Affordable Care Act health exchange. But Connecticut would duplicate federal efforts, he said, because the American Recovery Act enacted by Democrats in Congress and signed into law by President Joe Biden allocates $40 billion to the states to make the ACA more affordable.
“Connecticut doesn’t need to be doing something that the federal government is already taking a lead on,” DiPentima said.
Businesses criticized the tax at a news conference Thursday, saying it was yet another proposal that would make it more costly to operate in Connecticut.
“Hearing … that there will be an extra cost to doing business in the state is nothing new,” Steven Fradianni, owner of M&S Paving and Sealing in South Windsor, said at a recent news conference. “We hear it often enough, but I have to wonder how much the lawmakers think we can take before we break.”
Rep. Sean Scanlon, House chairman of the legislature’s finance committee, countered that Congress has killed a $300 million annual federal tax and the state assessment would be one-sixth that amount.
“It’s not credible when they say it’s a tax burden on them,” said Scanlon, D-Guilford.
He said the federal aid included in the stimulus bill extends only two years.
Sen. Matt Lesser, the Senate chair of the insurance committee, said the Connecticut Insurance Department would assess the tax on insurers and third-party administrators, “everyone but small business.” He said a state subsidy would make fixes in health insurance such as a “family glitch with dependents” facing unaffordable costs.
But businesses and Republicans say insurers will pass the tax on to customers. Sen. Kevin Kelly, the Senate Republican leader, called it a “$50 million tax increase on middle-class families” that he said will increase the cost of health insurance.
Gov. Ned Lamont weighed in, defending the tax as a way to help bring health insurance in reach for individuals with high-deductible plans.
“And that’s going to allow a lot more people to be able to afford health insurance, not only be able to afford it, but afford to use it and that’s what matters,” he told reporters Thursday.
Legislators in both parties say escalating costs in health care and insurance are a top complaint from constituents. Democratic leaders promised shortly after Election Day last November they would make public option health insurance — extending to small business and individuals insurance now pooled for municipal employees — a top priority this year.
The insurance industry, other businesses, Republicans and moderate Democrats are resisting the efforts of top Democrats.
Democratic Rep. Kerry Wood of Rocky Hill, a self-described fiscal conservative and the insurance committee’s House chair, crafted an amendment last month that would establish the Connecticut Insurance Department as the regulator of state plans and would call for regular audits. She said her changes to legislation advanced by the leadership establishes “better, more transparent protections for the consumer.”
Scanlon said he’s rounding up enough votes to remove the amendment from the legislation and restore it to what legislative leaders and Comptroller Kevin Lembo had intended. The comptroller, an elected constitutional officer running the municipal employee health insurance plan that would be expanded in a public option, should not be subject to review by the Insurance Department, a part of the executive branch run by the governor, Scanlon said.
“It’s inappropriate for the governor to oversee an independent constitutional officer. He’s a watchdog for the state,” he said of the comptroller.
Lesser said the state insurance plan would be regulated by the U.S. Department of Labor and criticized efforts to add the state Insurance Department as redundant. “There does not seem to be a good reason to having that except to not having it work,” he said.
Insurers responded by saying state regulation is essential. Susan Halpin, executive director of the Connecticut Association of Health Plans, said hot-button issues such as abortion would become more politicized than they already are if insurance coverage is determined by the comptroller’s office.
“You’re putting health insurance in a political office without any oversight whatsoever,” she said.
In addition, a fully insured plan as proposed by Democrats could leave taxpayers on the hook if state insurance plans pay out more in claims than they take in from premiums, critics say. The industry and CBIA have clashed with Lembo, saying the Connecticut Partnership Plan, the insurance pool for municipal employees, has operated with a shortfall and undermines arguments to expand the state’s presence in health insurance.
Lembo, whose office administers the plan, disputes a report by CBIA saying the Partnership Plan paid out more in claims and fees than it received in premiums from Jan. 1, 2016, through Sept. 30, 2020.
Stephen Singer can be reached at ssinger@courant.com.
