New Study: State Government-Controlled Public Option Could

Mean Higher Costs, Fewer Providers, Higher Taxes & Less Control Over Health Care For Connecticut Families

HARTFORD, Conn. – A new study by KNG Health Care Consulting (KNG Health) finds that creating a new government-controlled health insurance system, called a public option, for private employers, including non-profit organizations, in Connecticut could reduce state tax revenues, require new or higher taxes, and force significant cuts to payments for doctors, hospitals, and other health care providers in order to keep the program financially stable. This would leave Connecticut families and small businesses paying more, facing fewer choices of doctors and hospitals, and subject to higher taxes – all while giving unelected bureaucrats even more control over their health care. Since the analysis does not consider potential ERISA-related complications, the findings should be seen as a low-end estimate and the real-world costs and disruptions could be even worse.

The KNG Health study examines the effects of allowing various private employers to offer coverage through the state’s Partnership Plan – effectively turning it into a public option for the small-group and not-for-profit markets – over 10 years (2026–2035). Using the KNG Health Reform Model (KNG‑HRM), the analysis estimates how many employers would switch to the public option and the resulting impacts on coverage, health care spending, and state revenues under multiple eligibility and “take-up” scenarios.

Key findings of KNG Health’s study, which was supported by Connecticut’s Health Care Future, include:

State revenue from premium taxes and health insurance assessments is expected to decline and would fall between $44.5 million and $1.1 billion from 2026 to 2035, with the larger losses occurring if eligibility for the public option is broad and employer take-up is high (75 percent). The lost revenue helps fund critical state services. Replacing them would likely require new or higher taxes and fees that ultimately fall on Connecticut families and small businesses.
Provider reimbursement rates could need to be cut by 19 percent to keep the public option financially stable. With this reduction, total health care spending is estimated to fall between $89.5 million and $16.2 billion, with the largest cuts occurring in scenarios where eligibility is broadest and take-up is highest (75 percent). This significant cut to payments for doctors and hospitals will make it harder for providers to stay in business, resulting in longer wait times, providers leaving the state, and fewer options for families seeking care close to home.
If the state chooses not to cut provider payments, Connecticut would need to raise between $134.5 million and $17.3 billion in new revenue from 2026 to 2035 to replace lost premium tax and assessment revenue and keep the public option financially stable. This new revenue would likely come from new or increased taxes, premiums, or fees that are ultimately forced onto working families and small businesses, making health care less affordable.

The study also notes that by 2024, benefit spending in the Partnership Plan already exceeds premiums by 3.5 percent. To bring the public option in line with the average 88 percent benefit‑to‑premium ratio seen among large insurers, the state would need to cut provider reimbursement by 19 percent, which could shift the consequences of past mismanagement onto Connecticut families through reduced access and fewer provider choices.

The study builds upon recent reporting in the CT Mirror that revealed new insights into the poor financial health of both the state employee health plan and the state government‑controlled Partnership Plan 2.0. Comptroller Sean Scanlon’s office found the Connecticut Partnership Plan, the state‑run health plan for municipal and other public‑sector employees outside of state government, paid nearly $23 million more in claims than it collected in member premiums last fiscal year.

Additionally, the state’s own employee health plan has helped push Connecticut over its allotted budget in FY2025: “higher costs for Medicaid coverage and state employe[e] and retiree benefits account for significant portions” of the anticipated budget overruns. This is another clear demonstration that government-run health systems in Connecticut are unaffordable and unsustainable, and that expanding state-controlled coverage would only exacerbate these fiscal problems.

For families, the choice under a public option would be devastating. The state would face a difficult tradeoff: either cut payments to doctors and hospitals, risking driving providers out of Connecticut, or it is forced to raise substantial new revenue through higher taxes, premiums, or fees. In either case, Connecticut families and small businesses are the ones who pay the price, while state government gains greater control over their coverage and care.

Read the full analysis by KNG Health Care HERE.

Read more on the failure of state government-run health care programs HERE.