Lawmakers want to make CT Insurance Fund just for, well, insurance

Hartford Business Journal – Wednesday, April 2, 2025
By David Krechevsky

In 1991, the state established the Insurance Fund, which was created to fund the state Department of Insurance.

Setting up the fund was required to achieve accreditation from the National Association of Insurance Commissioners.

In the three decades since it was established, though, the purpose of the fund expanded. In addition to funding the Insurance Department, it now is used to finance several other agencies and programs that have nothing to do with insurance.

Some state lawmakers hope to change that during this year’s legislative session by shifting the non-insurance items to the state General Fund. Others, however, fear that shifting the health-related programs to the General Fund could jeopardize their funding.

More than insurance

The Insurance and Real Estate Committee has proposed House Bill 7117 to address the issue, based on the recommendations of the Insurance Fund Working Group, which was created by the legislature and approved by Gov. Ned Lamont last year.

The working group provided the legislature with recommendations for the Insurance Fund in a report it published in January.

HB 7117, which has bipartisan support, has already been approved by the committee and sent on to the Appropriations Committee for review.

In addition to funding the budget for the state Insurance Department, the Insurance Fund also provides allocations to other state agencies, including:

• • Office of the Healthcare Advocate (OHA)
  • Office of Health Strategy (OHS)
  • Department of Mental Health and Addiction Services (DMHAS)
  • Office of Policy & Management (OPM), and
  • Department of Aging and Disability Services (ADS)

The fund also was recently expanded to support the Office of the Behavioral Health Advocate (OBHA), but that position has not been filled.

The Insurance Fund is also used for the state’s purchasing pool for vaccines and a host of public health initiatives under the Department of Public Health (DPH), with the total appropriations for fiscal year 2025 estimated by the working group at $68.2 million.

Overall, according to the working group’s report, the total budget for the Insurance Fund in the current fiscal year is $135.1 million, up from $104.4 million in the previous fiscal year.

Eric George, president of the Insurance Association of Connecticut and a member of the working group, said the purpose of the Insurance Fund was altered about 10 years ago when the state was dealing with significant budget deficits.

“In order to get the budget back to close to balanced, they started to siphon off certain expenditures and … hide them into certain funds,” George said. “They took a lot of public health-related expenditures and they put them into the Insurance Fund.”

Rep. Kerry Wood (D-Rocky Hill), co-chair of the Insurance and Real Estate Committee, said many legislators believe the changes recommended by the working group are “very obvious.”

“The Insurance Fund should be used to cover insurance-related items,” she said. “It shouldn’t just be a fund that anyone who is looking for funding for their special project should then start doing.”

Wood said funding so many non-insurance programs goes against the fund’s intent, while also passing the cost of each program on to insurance customers. While health, auto, property and casualty and life insurance companies are assessed a fee that is paid into the fund, customers ultimately fund that through higher premiums.

The Insurance Fund is capitalized through three separate assessments on insurers and, to a limited extent, third-party administrators.

“So, it’s not like the industry is paying for it,” Wood said. “It just gets assessed on top of our premiums, whether it’s property and casualty, health care, commercial liability, or long-term care.”

She added that moving noninsurance items to the General Fund “would save people hundreds, if not thousands, of dollars as we implement this.”

‘An insurance issue’

According to the working group’s report, at the end of 2023 approximately 480,000 out of 3.6 million Connecticut residents had health insurance policies that were subject to state regulation. Of that 480,000, about 200,000 were insured through health insurance policies provided to individuals and small employers.

The amounts, called general assessments, that health insurance companies and health care centers pay are determined based only on their fully insured business.

“As a result, 13% of Connecticut residents currently bear the expense of the General Assessment costs that are the responsibility of the health carriers, which is approximately 50% of the total assessment or $18.4 million,” the working group report states.

George said the proposed changes are revenue neutral and not intended to reduce funding for any of the non-insurance programs.

“This is not a public health issue,” he said. “It is really a budgeting issue and an insurance issue.”

George also noted that HB 7117 does not move all of the non-insurance funding to the General Fund at once.

“OHS is extremely important, but it’s important to everybody and we need to have this (funding) go back into the General Fund, where it would be properly housed,” he said. “But we also know reality is reality, and to do that in one fell swoop is going to be a lot to manage.”

Instead, the bill moves the funding in stages over a five-year period.

Not the time

While the Insurance and Real Estate Committee voted on March 11 to approve the bill and send it to the Appropriations Committee, three Democrats, all senators, voted no: Sen. Saud Anwar (D-South Windsor) who is a vice chair of the Insurance committee and also a co-chair of the Public Health Committee; Sen. Matt Lesser (D-Middletown); and Sen. Martha Marx (D-New London).

Lesser said he believes now is not the time to shift the health-related programs out of the Insurance Fund to the General Fund, and he cited the recent cuts in federal funding as one reason why.

“Last week, Connecticut lost $175 million in federal funding” for public health programs, he said. “That was funding for the Department of Public Health, the Department of Mental Health and Addiction Services, immunization, health disparity work, supportive housing — all critical functions of public health.”

While shifting the funding for these programs is supposed to be revenue neutral, Lesser said there are no guarantees they would continue to be funded through the General Fund.

“We would be getting rid of their dedicated funding stream,” he said. “I don’t know at all whether that funding will be available, since it would be up against competing priorities every year.”

Anwar, meanwhile, said the shift to the General Fund would also send the money to OHS, which would administer the funds. “Our concern was that this shift would reduce transparency around the topic,” he said in an emailed statement. “Remaining mindful of funding sources and connections keeps the need for separation clear for legislators and the public.”

Wood, however, said she believes moving the non-insurance funding out of the Insurance Fund will provide greater transparency.

“I think that if you went to the public and asked them, should we be putting non-insurance-related fees onto your insurance products, they would be 100% with us,” she said.

Wood added that Lamont “completely ignored” the working group’s recommendations in his proposed budget, but that the co-chairs of the Appropriations Committee, Sen. Cathay Osten (D-Sprague) and Rep. Toni Walker (D-New Haven), were members of the working group.

“We are confident that they’re going to do the right thing and get this passed, and we can start phasing out these fees on people’s insurance products,” Wood said.

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