New Study: State Government Public Option Could Lead To Higher Taxes & Premiums, Reduce Access To Quality Care

HARTFORD, Conn. – A new study by KNG Health Care Consulting (KNG Health) finds that creating a new government-controlled health insurance system, known as the public option, in Connecticut could lead to negative consequences including higher taxes on Connecticut residents and businesses, higher premiums for workers and their families, and reduced access to quality care in the state.

The KNG Health study examines the effects of creating a public option similar to that proposed in Senate Bill 842 (SB 842), which was introduced during the January 2021 legislative session, on health coverage, state spending and state revenue. 

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

  • Existing state revenue from premium taxes and health insurance assessments could fall significantly under current rates – between $71 million and $122 million by 2023 – requiring the state to increase taxes and assessment on health insurers or through additional taxes on businesses and individuals.
  • Premiums could increase for workers and their families, including for those whose employers do not take up the public option.
  • The number of uninsured individuals under the public option could increase, depending on the rate of “take up” among employers. In four out of the six scenarios modeled by KNG, the increase in the number of uninsured ranges from nine thousand to 29 thousand.
  • The higher take up of the public option, the smaller the effect on the uninsured. In the two scenarios where firm take up is 75 percent, the number of uninsured could fall by only one percent.
  • The Connecticut Partnership Plan 2.0 is already underfunded. If Partnership Plan 3.0 is also underfunded, the state would likely need to raise premiums or use other tax revenue and/or cut provider reimbursement rates to ensure the plan is financially secure. The study estimates that provider reimbursement rates would likely have to be cut by 15 percent. This could negatively impact Connecticut residents’ access to the quality care they need.
  • If the state did not reduce provider reimbursement rates, the state would likely have to collect between $816 million to $1.152 billion to replace lost tax revenue and secure financial footing.

The study builds upon a May 2021 analysis by FTI Consulting which found that policymakers could likely need to raise revenues subsidized by taxpayer dollars, either in conjunction with or as an alternative to lower health care provider reimbursement rates. The analysis also found that lower provider reimbursement rates could mean fewer providers available to care for patients with public coverage, creating a two-tiered system in which privately insured patients have better access to care than those with public insurance.

Meanwhile, CT News Junkie reports that Connecticut residents are already benefiting from access to affordable coverage options under current law, including thousands who are eligible for free or low-cost health plans. Subsidies were boosted in 2021 by the American Rescue Plan Act – expanding eligibility for lower-cost coverage to even more residents. Tens of thousands of Connecticut residents qualify for free coverage through Covered Connecticut. The report illustrates how private plans and public programs are already working to expand access to affordable, high-quality coverage and care.

  • To read the full analysis by KNG Health Care, CLICK HERE.
  • To learn more about Connecticut’s Health Care Future, CLICK HERE.
Paid for by Connecticut’s Health Care Future, a project of Partnership for America’s Health Care Future Action.