Connecticut Governor Proposes Healthcare Cost Strategy: The Connecticut Option

Connecticut Governor Ned Lamont has proposed the "Connecticut Option," a state-devised health coverage strategy aimed at reducing healthcare costs. During his State of the State address, Lamont emphasized encouraging state employees, retirees, and small businesses to select healthcare providers that offer the best value, especially given disparities in provider charges for comparable outcomes.

Although the specifics of the Connecticut Option remain undefined, Lamont has referenced elements akin to previous public option proposals. These include coverage without co-pays or deductibles to foster competition with private insurers. However, he clarified that private insurers would continue their role in risk underwriting, leaving operational details somewhat ambiguous. Integration with existing state employee health plan cost-control efforts has been suggested.

Under House Bill 5041, the Connecticut Option is not directly established. Instead, the bill mandates the Office of Policy and Management (OPM) to study its feasibility and report findings in 2027 and 2028. Characterized as a "standardized health benefit plan" offered through private insurance carriers, the bill requires OPM to assess critical components like provider reimbursement frameworks, value-based contracts, premium strategies, and possible state-backed reinsurance requirements.

Several policy issues remain unresolved, such as the extent of state influence over provider payment rates and whether private insurers will fully manage risk or merely administer the product. The financial performance of Connecticut's state-run Partnership Plan, which faced a nearly $23 million deficit, underscores the potential financial implications of state-backed insurance, affecting both taxpayers and the state budget.

Connecticut's small-group health insurance market has seen a decline, with major carriers like Aetna and Cigna-Oscar exiting since 2022, leaving limited options and triggering double-digit rate hikes. Industry groups advocate for association health plans to enable small businesses to collectively purchase coverage, enhancing purchasing power and flexibility. This has become crucial as healthcare costs continue to escalate.

With the Connecticut legislature set to evaluate these proposals, lobbying from hospitals and insurers is anticipated. Recent disputes over insurer-provider contracts and reimbursement rates underscore potential challenges in altering provider payment structures. As healthcare costs rise, maintaining affordability remains crucial, urging legislators to proceed cautiously in considering the Connecticut Option to mitigate financial risk to taxpayers.