AN ACT CONCERNING EMPLOYEE HEALTH SECURITY.

Municipal Impact: None

Explanation

This bill requires the Department of Social Services (DSS) to establish a health insurance plan to cover employees and their dependents in companies with 5,000 or more employees. The bill also establishes a surcharge on companies that is equal to 25 percent of the minimum wage multiplied by the total hours worked by all enrollees during the year. The surcharge is to be paid each year effective January 1, 2006 and the DSS must establish a health insurance plan, to be known as Husky W, by January 1, 2007.

It is estimated that the surcharge on companies will raise $423 million in FY06. Companies can earn credits against their surcharge if they provide equivalent state employee health insurance benefits to their employees or pay the premium for the HUSKY W plan that will be available to their employees. These credits will offset a substantial portion of the $423 million in revenue gain to the General Fund assuming that companies either provide state employee health care coverage or pay for HUSKY W.

The amount of revenue resulting from the surcharge will depend upon how many companies neither provide for equivalent coverage or purchase HUSKY W on behalf of their employees. However, given that either coverage will not be available until FY07, and credits against the surcharge will not be computed until FY07 when an additional surcharge will be applied, the original revenue gain may not be reduced by any credits and be available to the General Fund in FY06.

The Department of Social Services will be subject to significant costs in administering a new health plan. There are estimated to be 117,000 employees who may participate in the new plan if the companies subject to the provisions of this bill choose to participate in HUSKY W. In addition to the employees, their dependents may also be eligible for HUSKY W. The bill allows DSS to establish the premium for such coverage and add a 2 percent administrative fee to cover the costs of operating and enforcing the program. A 2 percent fee may not cover the costs of operating the program, as it currently costs DSS more than 2 percent to operate the HUSKY A and B programs. In addition, there would be start-up costs that would need to be appropriated prior to the collection of a 2 percent fee on premiums. The department would need to either establish new enrollment broker services or expand the existing HUSKY broker services. The department would also have to establish and implement contracting services for the provision of a new health plan through a request-for-proposals process. The department would also have to provide a quality assurance process similar to that which is in place with the HUSKY program.

Additional costs will also be incurred by the department through the requirement that they provide a waiver for companies who can provide proof that they are providing employees with health care coverage that is substantially equivalent, both in terms of costs to the employees and benefits provided, which is required in the bill. The department will need additional staff to evaluate company health care plans to determine if they meet these criteria. This is a function that the department does not currently perform.

There may be potential savings to DSS if certain HUSKY A or B clients dis-enroll as a result of the establishment of HUSKY W. However, given the financial incentives for clients to remain in HUSKY A and the bill’s requirement that clients be allowed to remain in HUSKY A or B, it is unlikely that clients will move from one health plan to another.

Agency Affected	Fund-Effect
Department of Social Services	GF - See Below