Attorney General Blumenthal On HB 5536

Attorney General Richard Blumenthal issued his legal opinion on HB 5536 yesterday, concluding that if passed the state can neither expand the pool of insureds, nor can insurers raise rates (as Anthem has threatened to do). What this means is that for the first few years after Governor Rell signs HB 5536, there would be a separate pool created for municipalities, non-profits and small businesses to join. Insurers could bid on the contract to cover that pool.

CT News Junkie elaborates on the two pools:

Tuesday was the first time the idea of two pools has come up in discussions about the bill. Initially the idea was to use the bargaining power of the more than 200,000 lives already covered under the state employees health insurance plan to get better insurance rates for nonprofits, municipalities, and small businesses.

So if there are two pools how can there be bargaining power?

Majority Leader Chris Donovan, D-Meriden, the bill’s main proponent, said there is at least one insurance company willing to offer the same benefits and rates to the new pool of individuals. “The benefits would be the same. The rates would be the same,” Donovan said Tuesday. “We know there’s one insurer that is very interested,” he added.

As it stands, there is not a lot of competition in the health care marketplace: non-profits, small businesses, and municipalities do not have bargaining power on their own to negotiate lower rates, and no one entity among them represents a large enough group for insurers to vie for their business. These small unaffiliated groups are forced to pay higher rates than they would as members of a larger pool. By signing HB 5536, Governor Rell will increase competition in the health care marketplace because all of the state's major insurers will be able to bargain for the contract to cover what seems to me would be the second largest insurance pool in Connecticut.

Writing in the Connecticut Post today, Ken Dixon sheds some more light:

Blumenthal said that insurers would not be required to bid on the new pooling program, which would be negotiated by State Comptroller Nancy Wyman. "There would be some bids. Whether they'd be acceptable is another issue," Blumenthal said. "The state cannot unilaterally expand the pool of insured. Neither can the insurers raise their rates."

Donovan said that at least one of the three state-insurance contractors would be interested in bidding on a package that would include municipal employees at the very least. There are about 200,000 city and town workers in Connecticut and an estimated 10 percent could join a new insurance pool in the first year, Donovan said, citing experiences in the two dozen states that have similar plans.

Two pools--especially if there are insurers willing to offer comparable rates to the second, smaller pool--are better than one exclusive pool. Governor Rell should sign HB 5536.

Additional links to related media reports: